Mixed Session, Amidst Profit Taking, Hope For Interim Div Stocks, Economic Data

Market Update for August 11

Equity prices closed lower on the Nigerian Stock Exchange (NSE) Tuesday, as the All-Share index extended its losing momentum for the second successive trading session on a high transation volume but flat market breadth. This was despite the positive sentiment for crude oil price rally at the international market as nations gradually ease the lookdowns within their borders in the midst of rising new cases of coronavirus infection.

Profit booking continued on the exchange as highly capitalized stocks suffered losses in the midst of volatility, mixed sessions and expectation of interim dividend from the banking sector, as half year earnings reporting season gradually winds down in a few weeks. Recently, a moderately large shift away from telecom and healthcare has taken place, with traders and investors moving capital away from the high-flying sectors into more traditional market sectors like banking, Consumer Goods, and oil/gas, among others. The NSE index’s double top chart pattern after the mixed earnings has supported the market before the ongoing pullback.

Tuesday’s trading opened on the downside and vacillated on mixed sentiments and profit taking among high cap stocks that pushed the benchmark index to an intraday low of 24,882.04 basis points, from its high of 25,041.89bps, closing at 24,883.70bps, lower than it opened on a high traded volume.

Market technicals were negative and mixed as  volume traded was  higher than that of the previous session on a flat  breadth and high selling pressure as revealed by Investdata’s Sentiment Report showing 99% ‘sell’ volume and 1% ‘buy’ position. The total transaction volume index stood at 1.09 points, just as the impetus behind the day’s performance remained strong as Money Flow Index read 71.49points, from the previous day’s 69.33points, an indication that funds entered some stocks, despite the profit taking.

Index and Market Caps

At the end   of Tuesday’s trading, the NSE All Share index lost 143.288bps, closing at 24,883.70bps, from the 25,027.61bps it opened, representing a 0.58% decline, just as market capitalization lost N75.07bn at N12.98tr, from the N13.1tr opening value, which also represented 0.58% depreciation in value.

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The decline on Tuesday was due to profit taking in Dangote Cement, Guinness Nigeria, International Brewery, Access Bank and Lafarge Africa. This impacted negatively on the NSE’s Year-To-Date loss as it increased to 7.5%, while market capitalization YTD positive position dropped to N22.43bn, representing 0.17% above the year’s opening value.

Mixed Sector Indices

Performance indices across sectors were  largely bullish, except for the NSE Insurance and  Industrial Goods  that closed 2.48% and 2.16% lower respectively, while the NSE Consumer Goods led the advancers, gaining  0.93%, followed by the NSE Banking and Oil/Gas  with 0.52% and 0.26% up respectively.

Market breadth was at par as advancers were equal to decliners in the ratio of 17:17, while transactions in volume and value inched by 17.84% and 73.64% respectively as investors exchanged 206.61m shares worth N2.48bn from the previous 175.33m units valued at N1.43bn.   Volume was boosted by trades in Access Bank, Fidelity Bank, Guaranty Trust Bank, Zenith Bank and Wema Bank.

Cadbury and Nigerian Breweries were the best performing stocks after topping the advancers table with 6.82% and 6.25% respectively, closing at N7.05 and N34.00 per share on market forces. On the flip side, Prestige Assurance and Ikeja Hotel lost 10.00% and 9.82% respectively, closing at N0.45 and N1.01 respectively on selloffs. 

Market Outlook

We expect a mixed performance on increased profit taking and buying interest  as corporate earnings and  economic data are expected in the market especially the big banks results and inflation report for July, just as low stock prices and high dividend yields attracts buying interests to equities. This is despite the likely continuation of the mixed intraday movement in the midst of likely profit booking, with investors buying increasing positions in undervalued stocks ahead of Q3 numbers and last quarter of the year. This is also against the backdrop of the fact that the capital wave in the financial market may persist in the midst of relatively low-interest rates in the money market, high inflation and unstable economic outlook for 2020 as government and its economic managers are going front and back with mismatch polices.

Also, investors and traders are positioning in anticipation of interim dividend pay companies earnings reports, amidst the changing sentiments in the hope of improved liquidity and positive economic indices which may reverse the current trend.

We see investors focusing on portfolio adjustment and rebalancing by  targeting companies with strong potential to grow their dividend on the strength of their earnings capacity.

Again, the current undervalue state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation for the rest of the year.

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Ambrose Omordionm

CRO|Investdata Consulting Ltd





Tel: 08028164085, 08032055467