Market Update for June 21
Trading activities on the Nigerian Exchange for the week started on a negative outing, halting three straight sessions of up market on a low traded volume and sell sentiment that weighed down the benchmark NGX All-Share index, joining its counterparts across the globe, as they closed south despite the rally in oil price to $73.72 at the international market.
Monday also began the last full trading week of June, and investors fix their gaze on month and quarter-end window dressing, while all eyes stay fixed on corporate earnings expected to support market fundamentals and stock prices. This is especially true of stocks with positive and up trending 2020 and Q1 2021 earnings which have given insights as to what investors should expect at the end of half-year.
Analyzing comparatively, in Q2 2020, there was much of COVID-19 impact, despite which the market still rallied, after which the entire dynamics changed for good by Q3, even when the economy seemingly disconnected from the market. This year, however, there is a change in the narrative with the vaccination and oil driving the global economy as it opens up, just as the stock market. It is therefore expected that the quoted companies will perform even better in Q3 2021, just as we anticipate that the market will reverse up on the strength of the half-year earnings reports.
On account of these factors, those investors that are aware of these trends in the market will start strategizing and taking position, while keeping their gaze on a number of companies that declare interim dividend in Q2. This trend is likely going to continue, hence out expectation that the market would turn positive for the rest of the quarter and year.
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Meanwhile, Monday’s trading started slightly on the downside, but oscillated, turning positive by midday, after which it pulled back on profit-taking and portfolio readjustments that pushed the NGX index to an intraday low of 38,545.30 basis points from its highs of 38,678.48bps.
Market technicals were negative and mixed, as volume traded was lower than previous day’s in the midst of positive breadth and selling sentiment as revealed by Investdata’s Sentiments Report showing 100% ‘sell’ volume. Total transaction volume index stood at 0.91 points, just as momentum behind the day’s performance was relatively strong, as seen in the 64.85pts Money Flow Index, compared to previous day’s 71.44pts, indicating that funds left the market.
Index and Market Caps
The composite NGXASI, at the end of Monday’s trading, lost 103.61bps to close at 38,545.30bps, from an opening level of 38,648.91bps, representing a 0.27% decline, just as market capitalization shed N54bn, closing at N20.09tr, from its opening value of N20.14tr, also representing a 0.27% value loss.
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Monday’s downturn is attributable to selloffs and profit booking in medium and low cap stocks like Dangote Sugar, Fidson Healthcare, Oando, Ecobank Transnational Incorporated, Mutual Benefits, FTN Cocoa and Lasaco Assurance, among others. This impacted negatively on Year-To-Date loss, raising it to 4.28%, while the drop in market capitalization YTD soared to N976.48bn, representing a 4.45% drop from its opening value for the year.
Mixed Sector Indices
Performance indexes across sectors were mixed, with the NGX Insurance and Oil/Gas closing 1.13% and 0.07% lower respectively, while the NGX Banking led the advancers after a mild 0.11% gain, followed by Industrial and Consumer Goods with 0.06% and 0.03% respectively.
Market breadth closed marginally positive 18 advancers and 17 decliners; while transactions in volume and value terms were down as stockbrokers crossed 209.21m shares worth N1.76bn, compared to the previous day’s 220.64m units valued at N2.53bn. Volume was driven by trades in Access Bank, AXA Mansard Insurance, Zenith Bank, Mutual Benefits Assurance and Chams.
The best performing stocks for the day were Meyer and Champion Breweries which gained 8.77% and 6.06%, closing at N0.62 and N2.10 per share respectively on market forces. On the flipside, Fidson Healthcare and Lasaco lost 9.80% and 9.33% respectively, closing at N4.60 and N1.36 per share, on profit taking and selloff.
Market Outlook
We expect a mixed trend as bargain hunters take advantage of pullback to reposition ahead of quarter end and earnings season, as oil price continues its recovery at the international market with full-year and interim dividend possibilities around the corner.
We note 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 $73pb to support global economic 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 Q1 mixed numbers.
Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities ahead of interim dividend announcement. This is especially given that despite the seeming improvements, fixed income yield continues to offer negative real rate of return due to the galloping inflation.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by expected Q2 earnings reports, until the next MPC meeting in July.
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