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Mixed Trend May Linger As Pullbacks Attract Inflows, Enhance Positioning

Market Update September 13

Monday’s trading activities on the Nigerian Exchange had a mixed and volatile session, starting the week on a negative outing, thereby extending the bearish transition for the sixth consecutive day on a low traded volume and negative market breadth as players digest the recently published financials of first-tier banks. 

The seeming hike in Treasury Bills rates and some development in the fixed income market have triggered cautious trading and investing at this point ahead of another primary auction and release of the consumer price index report for the month of August from the National Bureau of Statistics. Funds leaving the equity space due to anticipated rate increase may not affect the market significantly, with the earnings and dividend yields of many companies above the 364-day TB rate. This is given that the real rate of return on fixed income instruments remains negative when compared with inflation rate of 17.38% at the end of July.  

Technically, the market had continued to downtrend on a sell volume, driven by selling sentiments by domestic institutional investors for all classes of stocks, especially the bellwether equities as major driver. 

Meanwhile, Monday’s trading opened slightly on the upside before oscillating mildly between the mid-morning to afternoon on selloffs across the major sectors and buying interests in medium and low priced stocks. This situation pushed the composite index to an intraday low of 38,911.36 basis points, from its highs of 38,941.29bps, after which it closed below the opening figure at 38,915.62bps.

Market technicals were slightly negative and mixed as volume traded was more than that of the previous day in the midst of breadth favoring the bears and selling sentiment as revealed by Investdata’s Sentiment Report showing 13% ‘buy’ volume and 87% sell position. Total transaction volume index stood at 0.87 points, just as the momentum behind the day’s performance was relatively weak, with Money Flow Index looking down at 36.14points, from the previous day’s 36.85points, an indication that funds left the market. 

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Index and Market Caps

At the end of Monday’s trading, NGX All Share Index shed 6.16 basis points, closing at 38,915.62bps, from its opening level of 38,921.78bps, representing a 0.02% drop, just as market capitalization fell by N3bn, closing at N20.28tr, from the opening value of N20.28tr, also represented 0.02% deprecation in value. 

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The day’s downturn was driven by selloffs in Lafarge Africa, UACN, Guinness, FBNH, Custodian, Zenith Bank, Stanbic IBTC Holdings, Africa Prudential and Livestock Feeds, among others. These impacted mildly on Year-To-Date loss, raising it to 3.36%, just as the loss in market capitalization YTD stood at N824.17bn, representing a 3.72% decline from the year’s opening value. 

Mixed Sector Indices

Performance indexes across the sectors were mixed, as the NGX Consumer goods and Banking closed higher by 0.20% and 0.13% respectively, while the NGX Oil/Gas Index led the decliners after losing 0.74%, followed by Industrial goods and Insurance with 0.11% and 0.08%. 

Market breadth was negative, as losers outpaced gainers in the ratio of 20:18, while transactions in volume and value terms were up after investors traded 201.1m shares worth N2.53bn, compared to the previous day’s 154.56m units valued at N2.27bn. The day’s volume was driven by trades in Universal Insurance, Fidelity Bank, FBNH, Courtville Busines Solution and Access Bank.

Morison Industry and Sovereign Trust Insurance were the best-performing after gaining 8.51% and 5% and closing at N0.51 and N0.21 per share respectively on market forces. On the flip side, SCOA and Veritas Assurance lost 9.72% and 8.70% respectively, closing at N1.30 and N0.21 per share, purely on selloffs. 

Market Outlook

We expect the mixed trend to continue as investors and traders utilize the market’s pullbacks to position, while many stocks are trading within their buy ranges, a situation expected to attract funds into the equity space given the dividend yields capable of serving as a hedge against inflation. Also, institutional investors and others continue to digest the Q2 GDP growth ahead of more first-tier bank results, as well as the continued repositioning of portfolios for the year’s 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 price rebounded in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.

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