Market Update for August 12
It was yet another very volatile and mixed session on the Nigerian Exchange Thursday as the NGX index action oscillated due to repositioning and profit taking activities of market players as the ongoing portfolio reshuffling and sector rotation supported the prevailing market wave ahead of the outstanding half-year results and economic data.
The mixed sentiment observed at the end of Thursday’s trading reflected the mood of sellers and buyers battling for dominance as revealed by the candlestick pattern and investdata sentiment report. Also, we note that the divergence between the index and volume action have been corrected by the day’s very high traded volume while money flow index turned up, an indication that funds entered the market to sustain the positive outing for the third consecutive session.
Technically, the composite NGX index is set to breakout the first resistance level range of 39,494.70bps and 39,875.66bps as trading opens on Friday, and any breakout of these levels will confirm a new strong trend in the market. At the same time, highly capitalised stocks remain a safe haven for players, considering the impressive half-year numbers that emanated from these companies ahead of their Q3 earnings reports expected within the last quarter of the year. Incidentally, that is also the most active quarter of the economy and the market, due to end of the year festivity and other seasonality.
Already, there is the formation of a saucer chart pattern that supports a continuation of the trend, which we need to watch as trading opens for the last session of the week, because profit taking is possible at this point or level. Below is the daily chart:
Meanwhile, Thursday’s trading opened on the green and was sustained till midday before vacillating on buying interests in high and medium cap stocks which pushed the NGX index to an intraday high of 39,582.30bps, from its lows of 39,356.59bps. Thereafter itclosed marginally above the opening level at 39,490.06bps on a negative market breadth.
Market technicals were positive but weak, with volume traded higher than that of the previous sessions in the midst of breadth that favours the bears on mixed sentiments as revealed by Investdata’s Sentiment Report showing 59% ‘buy’ volume and 41% ‘sell’ position. Total transaction volume index stood at 2.31 points, just as the impetus behind the day’s performance remained relatively strong with Money Flow Index reading 60.99 points, from the previous day’s 56.70 points, an indication that fresh funds entered the market.
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Index and Market Caps
The benchmark index NGXASI, at the close of transactions gained 41.60bps, at 39,490.06bps, from an opening level of 39,448.46bps, representing a 0.11% up, just as market capitalization rose by N21.67bn at N20.57tr, from its opening value of N20.57tr, also representing a 0.11% value gain.
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Thursday upturn was driven by price appreciations in Dangote Cement, GTCO, Zenith Bank, Unilever, and Flour Mills, among others. These gains impacted mildly on Year-To-Date loss, as it reduced to 1.94%, just as loss in market capitalization YTD also dropped to N481.87bn, representing a 2.29% decline from its opening value for the year.
Bearish Sector Indices
Performance indexes across sectors were bearish, except for the NGX Industrial goods that closed 0.35% higher, while the NGX Insurance Index led the decliners, after shedding 1.80%, followed by Banking, Oil/Gas and Consumer goods with 0.24%, 0.23% and 0.02% respectively.
Market breadth turned significantly negative, with losers outnumbering gainers in the ratio of 24:8, while transactions in volume and value terms were up as stockbrokers traded 570.2m shares worth N2.28bn, compared to the previous day’s 181.42m units valued at N2.09bn. The day’s volume was largely driven by trades in Honeywell Flourmill Plc, Vitafoam, and FCMB.
Honeywell Flourmill and Wema Bank were the best-performing, after the consumer goods maker gained 10% to hit a new 52-week high, while the bank chalked 3.95%, closing at N1.87 and N0.79 per share respectively on the strength of impressive Q1 numbers and market forces. On the flip side, SFS REIT and Tripple Gee lost 9.99% and 9.28% respectively, closing at N61.75 and N0.88 per share, on selloffs and profit-taking.
Market Outlook
We expect the mixed trend to continue on profit booking and repositioning in value and growth stocks on the strength of half-year earnings reports, while investors continue their portfolio reshuffling and studying of the corporate earnings ahead of the July inflation, and Q2 GDP data release, as well as results from interim dividend-paying banks. Also, investors are still observing the interplay of market forces following recent developments in the FX market with the decision to stop the sale of US$ to BDC operators. The day’s mixed volume suggests that smart money is taking advantage of the oscillating trend and relatively low prices to reposition. It is noteworthy that oil price continues to oscillate in the international market; corporate actions, as well as the interim dividend possibilities,are around the corner.
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.
Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021 and beyond, looking the way of mispriced equities ahead of interim dividend announcement and last quarter economic activities. This is especially given that despite the seeming improvements, fixed income yield continues to offer a 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 next month.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
