Mixed Sentiments Ahead Of Midweek’s TB Primary Market Auction, As Investors Opt For Sound Stocks

Market Update for August 21

Nigeria’s stock market extended its rebound to start the week on a positive note, amid buying interests in consumer goods and others that helped the benchmark NGX All-Share index to close higher on a low traded volume and positive market breadth. Investors continued to realign their portfolios on the strength of the half-year corporate earnings released so far, and mixed macroeconomic data, coupled with what is happenings in the fiscal and monetary space as the new members of the federal executive council who were sworn-in on Monday by President Bola Tinubu in the face of an ongoing economic reforms that present opportunities and challenges for businesses and investors.
The current state of the market and economy calls for cautious trading, while discerning investors are taking advantage of the market consolidation and new uptrend, after forming a descending triangle and flag that supports a continuation of trend or reversal. It is the time to buy into valued stocks with strong fundamentals, as the market looks forward to a favourable and positive news that will trigger yet another round of buying interest. Also noteworthy is the rates mixed outlook in the fixed income market, amidst portfolio repositioning and sector rotation on the strength of company earnings’ power.
These situations are to further guide the ongoing portfolio repositioning ahead of first-tier banks’ half-year earnings reports which we expect would be net beneficiaries from foreign exchange revaluation gains that should support higher interim dividend payouts. Also, Accesscorp, Zenith Bank and Stanbic IBTC notified the exchange of a likely delay in the submission of their audited half-year results, even as all eyes are on the audited full-year financials of PZ, Flour Mills and Honeywell Flour for the periods ended May and March 2023 respectively.
The increasing volatility is likely to continue due to the changing economic fundamentals, and government reforms that are driving the reset in financial market and trading environment. It should be taken against the backdrop of August being a very dicey month when eyes should be kept on the chart, trend, sentiment and volume at all times, using multiple time frame analyses to catch short, medium and long term buying breakouts or sell breakdowns. All these are already impacting prices of equities in the face of the recent rate hike that made fixed income instruments attractive for risk averse investors, just as institutional investors continue digesting these numbers in the midst of rising inflation and opportunities within the equity space to hedge against its surging pressure.
The NGX index’s action trades above the 65,000 basis points, ‘T line’ and 50-day moving average, attracting bargain hunters to position in fundamentally sound medium and low cap stocks amidst digesting of scorecards of many companies, assigning of portfolios to the cabinet ministers. This is besides the $3bn loan to support FX float in the exchange market. It is therefore time to use technical tools, if you have been ignoring charts and fighting the trends, it is your chance to step up your game. It is pertinent to stress the fact that profit taking is part of market dynamics, which can occur at any time, as we look forward to a mixed outing and intermittent profit taking, since policy factors that pushed the market up are shaking, as market wait for favorable news and statements from the minsters.
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Oil price oscillation continued, pulling back to trade at $84.22 per barrel in the midst of weak global demand, gloomy economic condition in China and fear of rate hike again. The Russia-Ukraine war remains a major concern, the prevailing high interest rate regime and slowing inflation. Also, supply tightened due to the Russia-Ukraine conflict that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Monday’s trading opened on the upside and it was sustained throughout the session on buying interest in highly priced stocks and other blue chip companies. This situation pushed the Index to an intraday high of 65,292.41 basis points from its lows of 64,690.33bps, before closing above the opening points at 65,202.41bps.
Market technicals were positive and mixed with a lower volume traded when compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 0.42 points, just as the momentum behind the day’s performance was strong, with Money Flow Index reading 64.29pts, from the previous day’s 53.63pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Monday’s trading, the composite NGXASI gained 481.32bps, closing at 65,202,41bps, from its 64,721.09bps opening level, representing a 0.74% growth. Market capitalization rose by N263billion to N35.69tr, from the previous day’s N35.42tr, which also represented a 0.74% appreciation in value.
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Meanwhile, the upturn was driven by accumulation and buying interests in the shares of BUA Foods, Dangote Sugar, GSK, Transcorp, Mansard, Stanbic IBTC, and John Holt, among others. This impacted positively on Year-To-Date growth, which increased to 27.20%, while Market Capitalization YTD gain went up to N6.86tr, representing a 27.60% rise above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes were in green, except for the NGX Banking that closed 0.35% lower, while the NGX Consumer Goods led the advancers after losing 4.97%, followed by Insurance and Industrial goods with 0.41% and 0.04% respectively. just as NGX Energy closed flat.
Market breadth was positive as gainers outpaced losers in the ratio of 31:15, while activities in volume and value were down after investors exchanged 231.60m shares worth N3.99bn, driven by trades in Transcorp, Universal Insurance, GTCO, Jaiz Bank and CHI Plc.
John Holt and SCOA were the best performing stocks, gaining 9.66% and 9.40% respectively, closing at N1.59 and N1.28per share each, on market forces. On the flip side, Tantalizer and Omatek lost 10% and 9.09%, closing at N0.36 and N0.30 per share, purely on the back of selloffs.

Market Outlook
We expect mixed sentiments ahead of midweek’s TB primary market auction, bargain hunting and others like market players digesting macroeconomic data and the $3bn cash loan to help intervention in Nigeria’s FX market in the midst of expected first tier banks earnings reports and bargain hunting, while portfolio realignment and sector rotation persists.
However, pullbacks are creating buying opportunities amidst economic reforms of the government, just as more policy pronouncements and economic managers hit the ground running, a situation expected to offer investment direction eventually.
We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price rally to take profit, while also looking at the trends and events across the globe and domestically.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605