Mixed Trend Ahead On Oil Price Rebound, Portfolio Rebalancing, Earnings

Market Update for August 03

The Nigeria stock market, on Monday, had another volatile and mixed trading session, just like its counterparts across the global, closing higher on reactions to the better than expected half-year earnings reports, as well as the impressive full-year numbers from Flour Mills Nigeria Plc which was accompanied with an announcement of N1.40 dividend per share for shareholders. The session also witnessed increased buying interests in first tier banking stocks that pay interim dividends, as they prepare to publish their audited results any moment from this week.

The low price attraction and impressive earnings from the healthcare sector have also attracted demand for industry stocks, especially the Q3 numbers from Neimeth Pharm that has September as its financial year-end, in addition to the half -year earnings from GSK and Fidson Healthcare. It is also, expected that the recent injection of funds into the sector by the Central Bank of Nigeria (CBN) will further boost activities and enhanced profitability, which will further support the industry’s price performance.

Meanwhile, Monday’s trading opened slightly in the upside and oscillated between the mid mid-morning to late afternoon on positioning and profit taking among the mid and large cap stocks that pushed the NSE index to an intra-day high of 24,783.61basis points, from its low of 24,427.73bps. Thereafter, it closed higher at 24,766.12bps on low traded volume for the day.

Market technicals for the session were positive and mixed with volume traded higher than the previous day’s in the midst of breadth that favoured the bulls, amidst and increased buying pressure as revealed by Investdata’s Daily Sentiment Report showing a ‘buy’ position of 95% and sell volume of 5%. The total daily transaction volume index stood at 0.97, just as energy  behind the day’s performance stayed weak, with Money Flow Index reading 41.58 points, as against the previous 35.92ps, indicating that funds entered  some stocks.

Index and Market Caps

The key performance index at the end of Monday’s trading gained a marginal 72.39bps, to close at 24,766.12bps from 24,693.73bps, representing a 0.29% gain, just as market capitalization was N37.76bn up at N12.86tr.

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Monday’s upturn resulted from demand for medium and large cap stocks like BUA Cement, Flourmills Nigeria, Guaranty Trust Bank, UBA, FBNH, Honeywell and Neimeth Pharm.  This impacted mildly on the NSE’s benchmark index, reducing the Year-To-Date loss to 7.73%, while market capitalization YTD turned remained positive, at N108.14 billion representing a 1.42% improvement over the year’s opening level.

Bullish Sector indices                                                                    

Performance across the various sectors were largely bullish, except for the NSE Insurance, which  closed in the red  by 2.35%,  while the NSE Industrial Goods, Banking and Consumer Goods indexes were  up by 0.78%, 0.70% and 0.13% respectively, just as NSE Oil/Gas closed flat.

Market breadth was positive, as advancers outnumbered decliners in the ratio of 19:16, while activity in volume and value terms were up by 83.57% and 34.52% respectively, after investors traded 186.48m shares worth N1.31bn, as against the previous 101.59m units valued at N973.64m. Volume was boosted by trades in Transcorp, Custodian Investment, Guaranty Trust Bank, FBNH and UBA, as the market gradually revved back to life after the two-day public holiday to celebrate the Muslim festival of eid-el-Kabir declared by the Federal Government for Thursday and Friday last week.

Neiemth Pharm and Flourmills Nigeria were the best-performing stocks of the day. They gained 10%and 9.97% respectively, closing at N1.65 and N18.75 per share on improving numbers and the dividend of N1.40 per share.  On the flip side, UACN and Aiico Insurance lost 10% and 9.57% to close at N6.30 and N0.85 per share respectively on unimpressive earnings and profit-taking. The loss by UACN could also not be unrelated to the sudden change of plans three months after a successful rights issue. The board, on Monday, informed the NSE of its new plan to sell 51% of its equity stake in UACN Property Development Company to Custodian Investment for a yet undisclosed amount.

Market Outlook

We expect a mixed trend on crude oil price rebounding and portfolio rebalancing on the strength of half-year earnings released, in the midst of the March full-year accounts and interim dividend expectations.

Also, the impact of positive news of a Coronavirus vaccine and CBN policies on the economy, just as investors are worried about inconsistent government policies which have continued to dampen confidence.

This is likely to support volatility, thereby creating new entering opportunities. Money flow index continues to look up at 41.58 despite flowing from one sector to the other, seeking value in terms of low prices with high upside potentials.

This is just as economic recovery is threatened by the rising cases of the COVID-19 pandemic, as earnings reporting season is gradually coming to end, which implies that opportunities are still available as sectoral rotation continues. Also, sectors that have suffered oversold so far offer attractive risk-reward buy-opportunities and outlook for considerable short, medium and long term investment.

For immediate liquidity or cash, we advise that you trade low priced stocks with serious caution to avoid being trapped. However, the market’s high dividend yield continues to attract buying interests, as few audited and unaudited corporate earnings will hit the market, going forward. This is despite the likely continuation of selloffs. Investors are buying to increase their positions in undervalued stocks on H1 numbers. It is also against the backdrop of the fact that the capital wave in the financial markets may persist in the midst of relatively low-interest rates in the money market, high inflation, and unstable economic outlook for 2020.

Again, the current undervalued state of the market offers 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 going forward. Also, traders and investors need to change their strategies, because of the NSE’s pricing methodology, the CBN directives, and their impact on the economy in the nearest future.

NB:The home study packs and videos that will help you prepare and take advantage of the current happening in the market and economy are available at Investdata. How to invest or trade profitably in a changing market dynamics and recession. Mastering earnings season for profitable investment To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085,08032055467, 08111811223 now.

 Ambrose Omordion

CRO|Investdata Consulting Ltd





Tel: 08028164085, 08032055467

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