Mixed Sentiments On Bargain Hunting, As Investors Digest Q2 GDP, Await Tier-1 Banks Earnings

Market Update for the Week Ended August 25 and Outlook for Aug 28-Sept 1

The benchmark All-Share index of the Nigeria Exchange recorded a rebound in the last full trading week of August, thereby halting previous week’s loss position on the strength of positive sentiment and buying interests in consumer goods stocks like BUA Foods, ahead of its rescheduled Annual General Meeting now to hold earlier on September 14, which will also be the payment date.
Market players are also taking advantage of the news of an impending merger by Dangote Sugar, Nascon Allied and Dangote Rice, all of which are sister companies, thereby eliciting interests for position taking in Dangote Sugar and Nascon whose shares are already trading on the exchange ahead of the merger scheme and court order in that respect. This is not strange, given that this discern investment witnessed the value created by similar companies in the same line of business in just two years, and knowing that some of the products in the merging companies are inelastic in demand. This also will support the new company’s performance and value in the food chain industry, despite the prevailing low purchasing power of Nigerians.
The NGX All-Share index’s action closed the week on positive note, to sustain the big uptrend on a low traded volume in the midst of price adjustment for full-year and interim dividends of 35 kobo, 20 Kobo and 15 kobo by NNFM, Redstar Express and Custodian Investment respectively.
Also, during the week, NBS released the nation’s Q2 GDP reports, which revealed a slow growth of 2.51% in Q1 2023, a decline from 3.54% posted in the same period of 2022, which is below expectation and a serious task before the government and its new minsters. It is obvious that the nation’s population is growing faster than its economy, thereby posing a big problem in need of urgent attention by all concerned. We must know that in any uncertainty or challenging environment, there are opportunities for discerning investors and smart traders, following which this is the time to look at the sectors or industries that drove the growth or supported the expansion.
Here, we note that the Q2 GDP performance was driven by the service sector that recorded growth of 4.42%, contributing 58.42% to the aggregate GDP, while agriculture and industry contributed 1.5% and -1.9% respectively to the GDP.
Buying interest and mixed sentiment continued as portfolio rebalancing and sector rotation persisted in the face of the latest mixed corporate earnings in the market that are yet to impact much on the prices of most equities, due to the ongoing profit taking, seeming high yields in TB and rising inflation. Institutional investors seem to be quiet in the market as revealed by the prevailing low volume of transactions, as they continue to digest these numbers but are yet to start accumulating position in those companies which scorecards beat expectation on NGX recently. Also, the market expects positive news or policies of government to support the sector or company performance going into the future. Noteworthy also is the fact that some corporate results came below expectation, especially some blue chip companies and medium cap stocks that posted mixed and even disappointing numbers. As such, let your stop-loss and exit strategies guide you at a time like this.
Trade metrics for the week as revealed by sentiment reports indicated 58% buy position and money inflow reading 90.36, hence the need for investors to navigate the market now that many stocks are fairly priced in the face of mixed corporate numbers. The market situation of low traded volume and uptrend in the midst of technical pattern of consideration and strong momentum that signal that continuation of trend or reversal, as bargain hunters take advantage of volatility and relatively low prices to position in fundamentally sound stocks
To navigate the Q3 market volatility and the rest of the year’s mixed outlook profitably using fundamental and technical analyses to run, join investdata live sessions at noon every trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy. As volume of transaction witnessed within the week remain above the average traded volume, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
Oil price continued its oscillation, even as it closes the week low to trade at $84.48 per barrel in the midst of imbalance in supply and demand as fear of rate hike to checkmate inflation continue. We note the rising geopolitical tensions and supply disruptions due to the Russia-Ukraine war that has lingered for more than a year now, and is indeed escalating. The up and down movement of oil prices also continues to drive volatility across different investment windows.

Movement Of NGXASI
It was a bull dominated week of four trading sessions of up market and one day of selloffs as buying interests in highly priced stock like BUA, and other blue chip companies that supported the reversal and positive sentiments witnessed during the period. There is also portfolio repositioning on the strength of global happenings, the corporate earnings and mixed macroeconomic data released so far.
Trading for the week opened on a positive note, extending the previous gains, after chalking 0.74%, which was sustained till midweek when the bourse recorded 0.44% and 0.01% high respectively. There was however a pullback on Thursday when the index shed 0.14%, before rebounding on Friday by 0.24% on improved buying sentiment. This brought the week’s cumulative gain to 1.29%, compared to the previous week’s 0.93% loss.
Consequently, the NGXASI gained 837.82bps, closing at 65,558.91bps from the previous week’s 64,721.09bps, which represents 1.29% growth, after touching an intra-week high of 66,185.04bps from its lows of 64,690.33bps. Similarly, market capitalisation rose by N459bn, also representing a 1.29% appreciation in value, closing at N35.88tr from opened value of N35.42 trillion.
Top advancers table for the week was dominated by low, medium and large cap stocks, amidst buying sentiment, profit booking and strong momentum, as volatility continued. Also notable was the mixed sentiment, while investors navigate the changing economic fundamentals and trading environment. So far, market players are revealing the upside potentials and inherent value in some companies with strong earnings power and volume patterns ahead of more half year earnings reports with interim dividend. So, buying into value, strong earnings and high dividend payout companies remain the way to go, as price correction impacts positively on dividend yields.
Market breadth for the week was negative as losers outpaced gainers in the ratio of 46:32 on mixed sentiments as revealed by investdata sentiment report showing 58% ‘buy’ volume and 42% sell position. Money Flow Index is looking up to read 90.36bps, from the previous week’s 85.39points, an indication that funds entered the market on a weekly chart. The candlestick formation of the market’s index on a weekly time frame revealed a top reversal pattern due to high yields in money market, and position taking in highly priced stocks, amidst rising inflation rate. There is also Impacts of the ongoing economic reform of the new government.

NGXASI Weekly Chart

The NGX index’s action on the weekly chart revealed a consolidation pattern and ranging market on a low traded volume to signal continuation or reversal in the face of mixed sentiments, as the market remains strong in the midst of increased volatility and profit taking. We note also that the index is trading above ‘T’ line and strong support level of 65,000 points, as NGX trades above the 20- and 50-day moving average. The candlestick formation, at the end of the week, showed sellers are in control, as investors and analysts digest macrocosmic data, financials and other factors to reposition their portfolios for Q3 and beyond. The candlestick pattern indicates continuation of the trend, depending on market forces in the new week.

Mixed Sectoral Indices
Sectoral performance indexes were mixed, with the NGX Consumer and Insurance closing 11.58% and 1.22% higher respectively, while the NGX Banking led the decliners after losing 3.57%, followed by Energy and Industrial goods with 1.69% and 0.01% respectively.
Transactions in volume and value were mixed as investors exchanged 1.81bn shares worth N29.30bn, compared to the previous week’s 1.69bn units valued at N29.41bn. Volume was driven by financial services, Conglomerates and Consume goods industry. Specifically, volume was boosted by trading in shares of Transcorp, Fidelity Bank, Accesscorp. Dangote Sugar and BUA Foods.
ABC Transport and Transcorp were the best-performing stocks, gaining 41.67% and39.42% respectively, closing at N0.68 and N5.80per share on market sentiment and business expansion. On the flip side, the share prices of Tantalizers and Redstar Express lost 27.50% and 17.43% respectively at N0.29 and N2.89 per share, on back of profit taking and price adjustment for dividend,

Outlook for the week
We expect the mixed sentiments to continue on bargain hunting and profit taking, as market players digest Q2 GDP ahead of first-tier banks corporate earnings in the face of sector rotation and more policy pronouncement. These are coming in the midst of, corporate actions, price adjustment and payment dates. However, retracement to the 63,578.12bps level and below is possible on profit-taking as global and domestic events unfold.

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