Mixed Trading, Amid More Interim Div Stocks, Month-End Portfolio Reshuffling
Market Update for the Week Ended August 27 and Outlook for August 30- Sept 03
Transactions in the last full trading week of August on the Nigerian Bourse had a positive sentiment and mixed performance and finished flat on an above average traded volume, halting the previous week’s negative outing after more medium and low cap stocks appreciated in price on a positive market breadth. The stronger corporate earnings and improving macroeconomic indices shown in the Q2 GDP quarter-on-quarter growth of 5.01% confirmed the recovery in the country’s economic position, offering an insight into what the future holds for the stock market and economy in general.
Investors continue to review and digest the Q2 GDP data released by the National Bureau of Statistics (NBS) last week, along with the better than expected half-year earnings reports and other macroeconomic data like the purchasing managers index. The PMI hit an 18-month high of 55.4 points in July, from the 53.6 point of June, according to a Stanbic IBTC Bank report the country’s inflation rate had also recorded four straight months of decline at 17.38% from its high of 18.28% in March this year.
A midst all these, Zenith Bank, the first of the interim dividend paying banks released it half year audited results on Friday, even as Guinness Nigeria within the period under review presented its full-year earnings report with improved performance, declaring a dividend of 46 kobo. Zenith Bank’s half-year numbers released was flat but sustained it positive earnings growth for two decades, even as gross earnings slipped marginally to N345.56n from N346.09bn in 2020, while profit inched by 2.21% to N106.12bn, from N103.83bn in the previous half-year, which translates N3.38 to earnings per share, compared to the N3.31 posted in the first half of 2020, from which the directors will pay 30 kobo dividend per share; price to earnings ratio of 7.19x and earnings yield of 13.91%.
Technically, on the strength of more positive fundamental news and stronger momentum in the market, with increasing buying interests and sentiments, a breakout of this consolidation and sideways movement is underway on month-end window dressing that will usher in the September the last month of Q3. The recent breakout of strong resistance levels by medium and low priced stocks on a higher traded volume to attain new 52-week highs should be of concerns to investors and traders as they position and take advantage of these movement ahead of the Q4 seasonality and the Q3 earnings reporting season in October.
At this point when we look beneath the surface, and particularly down to the cap scale, we are seeing a different story. Ultimately, some stocks are going up, but most are not. This should give you concern, even as nobody knows what will happen next, so keep your mind open because you are in the market to make money.
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Movement Of NGXASI
The key performance NGXASI for the week had a mixed trend of two sessions of down market and three up as buying sentiment improved to dominate and redirect the period to close marginally positive.
Trading activities opened for the week under review on a negative note as the index slipped 0.12% down, but reversed on Tuesday recovering 0.08% on a rekindled demand for healthcare stocks. This trend was short-lived at midweek when the index shed 0.03%, and turned up on Thursday on positive news of the 5.01% GDP growth reported in the second quarter 2021. This positive sentiment was extended to push the NGX index up slightly by 0.03% at the end of Friday’s trading, bringing the week’s total gain to 0.01%, compared to previous week’s 0.10% loss.
Subsequently, the NGX All Share index rose by 2.57bps, closing at 39,486.65bps from its opening level of 39,5483.08bps, after touching an intra-week high of 39,494.93bps from its lows of 39,424.95bps on mixed sentiments and position taking in low cap stocks. Also, market capitalization rose by N1.41bn, closing at N20.57tr, compared to previous week’s N20.57tr, which also represented a 0.01% appreciation in value.
During the week also, the share prices of United Capital was reclassify as medium price stock from low after trading above N5.00 for more than four months. Also the share price of Custodian Investment, Tripple Gee Company and Northern Nigeria Flour Mills were adjusted for dividends of 10 kobo, 7 kobo and 15 kobo respectively, as recommended by their boards.
The week’s advancers table was dominated by a mix of medium and low cap companies, as investors and traders increased their demand for UPDC, Morison Industries, Consolidated Hallmark Insurance, FTNCocoa, Honeywell Flour, Transcorp Hotel, Eterna, Regency Assurance, GSK and Capital Hotel as investors continue to digest the latest GDP report. Market breadth for the period was positive on an improved traded volume that signals a renewal of accumulation by market players, as the week’s advancers outnumbered decliners in the ratio of 35:29.
NSEASI WEEKLY CHART MOVEMENT
From the above, the NGX index’s action has formed a motive wave 3 on a weekly time frame, with the candlestick formation indicating indecision among traders, but we need to watch out for a breakout as revealed by the chart pattern at the strong resistance as month-end draws closer. Already, all eyes are on the expected financials of interim dividend-paying stocks, after forming a ‘W’ that supports a continuation of the trend. Also, don’t forget the possibility of profit-taking at this level.
Mixed Sectoral Indices
Performance across sectors for the period under review was mixed, as the NGX Consumer and Industrial Goods indexes lost 0.43% and 0.19% respectively, while the NGX Insurance led the advancers, gaining 1.06%, followed by Banking and Energy with 0.30% and 0.08% respectively. Transactions in volume and value terms were mixed, after stockbrokers traded 1.03bn shares worth N8.18bn, compared to the previous week’s 866.54m units valued at N12.26bn. The week’s volume was driven by trades in Financial Services, ICT, and Consumer Goods, particularly Sovereign Trust Insurance, Mutual Benefits Assurance Transcorp, Zenith Bank, and Access Bank.
UPDC and Morison Industries were the best-performing stocks during the week after gaining 37.59% and 32.14% respectively, closing at N1.83 and N1.85 per share on market sentiment and forces. On the flip side, ABC Transport and Unilever Nigeria lost 15.38% and 10% respectively, at N0.33 and N13.50per share, purely on profit-taking.
Outlook for the week
We expect a mixed performance, being the week that ushers in September, while interpretation of Q2 GDP report continues, amidst portfolio reshuffling and sector rotation in the midst of funds entering the equity market on daily and weekly time frames. Considering that the March year-end accounts and half-year interim dividend qualification dates for most companies are within this week and in the new month. So there will be activities as investors participate in the interim dividend. So, let us keep our eyes on market breadth and direction.
We note also that some stocks are trading within their ‘buy’ ranges to become more attractive at this point for income investors and traders, even as the market anticipates positive news, while oil price continues to oscillate above $68pb to support the global economy and stock market recovery across climates. We also expect the ongoing COVID-19 vaccination to support global and domestic economic recovery that will enhance the market and give direction.
The banking sector and others remain attractive on the back of the prevailing low prices, despite the mixed half-year earnings
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