Mixed Trend, As Pullback Offers New ‘Buy’ Prospects, Investors Digest Q2 GDP Data

Market Update September 1

Trading momentum on the Nigerian Exchange slowed again to usher in September as the bear transition continued for the third successive session on a low traded volume and negative breadth. There was profit booking in low and medium-priced stocks that rallied recently, as well as selloffs in blue-chip that had persisted since the beginning of the week. 

We note that the prevailing pullbacks or corrections in the recent sessions are part of market dynamics, especially after the market had witnessed a Wave 5 extension in the previous month, creating new entry opportunities in this last trading month of Q3 and ahead of Q4 and year-end seasonality.

September started on a flat note, but it has been a very positive month on the exchange with strong buying positions and positive sentiments over the years. Historical data reveals that over the last 10 years, the month has closed positive seven times and negative in three- 2011, 2017 and 2018, being end of the quarter that ushers in Q4 and the Q3 earnings season. Given the changing market dynamics and trading environment, we look forward to a mixed September as the factors that kept the market on its oscillating trend are still there, even as the state of the economy, corporate earnings performance, and other factors would be game-changers as we go into the new month.

The seasonal effect in equity investment cannot be overemphasized, because it occurs and reoccurs, just as it is one of the basic principles in technical analysis that events or trends repeat themselves to guide decisions making. This could be due to a host of factors like sales or consumption patterns, harvest season, policies from both the fiscal and monetary authorities which play major roles in the scheme of things. Our research data over the last 10 years reveal that the best months to buy stocks are between January and April, which have been strong, in addition to July and September through to December.

Technically, the NGX index action is on corrective wave on a daily time frame after its sideways movement that supports a breakout or down, depending on market sentiment or forces which requires volume and other information for any trend to be sustained.

Meanwhile, midweek’s trading started slightly on the upside and oscillated on cautious positioning and profit-taking across sectors and all classes of stocks that further pushed down the NGX index to an intraday low of 39,170.92 basis points, from its highs of 39,233.36bps. Thereafter, it closed below the opening point marginally at 39,184.22bps.

Market technicals were negative and weak as volume traded was lower than that of the previous day in the midst of breadth favoring the bears on a selling pressure as revealed by Investdata’s Sentiment Report showing 21% ‘buy’ volume and 79% sell position. Total transaction volume index stood at 0.73 points, just as the energy behind the day’s performance was relatively weak, with Money Flow Index reading 44.98points, from the previous day’s 56.51 points, an indication that funds left the market as players continuing to take profit since Monday.

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Index and Market Caps

At the end of midweek trading, the NGX All-Share index lost 35.43bps, closing at 39,184.22bps, from its opening level of 39,219.61bps, representing a 0.09% drop, just as market capitalization fell by N818.46bn, closing at N20.42tr, from the opening value of N20.43tr, also represented 0.09% value loss.

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Wednesday’s downturn was due to selloffs and profit-taking in stocks like Nigerian Breweries, Dangote Sugar, UACN, FBNH, Access Bank, Oando, Honeywell, UPDC, and Morison Industry, among others. These impacted mildly on Year-To-Date loss, which increased to 2.70%, just as the loss in market capitalization YTD stood at N641.92bn, representing a 2.94% decline from the year’s opening value.

Bearish Sector Indices

Performance indexes across the sectors were red, except for the NGX Industrial Goods that closed flat, while the NGX Consumer Goods Index led the decliners, after losing 0.62%, followed by Banking, Insurance, and Energy with 0.23%, 0.20%, and 0.08% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 17:9, while activities in volume and value terms were down after investors traded 169.3m shares worth N1.42bn, compared to the previous day’s 425.67m units valued at N1.97bn. The day’s volume was driven by trades in Transcorp, Zenith Bank, Honeywell Flour Mills, UACN, and Mutual Benefits Assurance.

AIICO and Custodian Investment Plc were the best-performing, gaining 4.04% and 3.15%, closing at N1.03 and N6.55 per share respectively on low price attraction and market forces. On the flip side, FTN Cocoa and Morison Industry lost 8.77% and 5.42% respectively, closing at N0.52 and N1.92 per share, purely profit-taking.

Market Outlook

we expect a mixed trend and reversal as the market breaks down its consolidating range to present another buying opportunity for discerning traders and investors as investors digest the Q2 GDP growth ahead of more first-tier banks results, as well as the continued repositioning of portfolios for the year last quarter. Also, investors are still observing the interplay of forces in the FX market as the CBN gives a guideline for the new digital currency platform. The day’s low volume suggests that institutional investors and others are still cautiously looking at the numbers. It is noteworthy that oil prices rebounded in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.


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