Mixed Trends May Linger On Profit Taking, Reactions To Emerging Corporate Earnings, 1st-Tier Banks Earnings

Market Update for the Week Ended Sept 1 and Outlook for September 4-8

The positive outing of the Nigerian stock market waxed stronger on a weekly and monthly basis as the benchmark NGX All-Share index closed higher, extending its bull-run for the fourth successive month and two weeks. September open Thursday on a positive note, signaling the possibility of it repeating the previous performance pattern after breaking out the 2008 strong resistance level of 66,317.09 basis points, trading at a new all-time high on a low volume and strong buying sentiment.
This positive momentum at the material shift of the key performance NGXASI was driven by corporate actions of mergers, acquisitions and interim dividends announcements during the week when investors’ buying sentiment recorded 100%, while money flow index is reading 90.57. These revealed that the positive sentiment attracted inflow of funds into the equity space, despite the mixed corporate earnings. The service sector performance remains impressive enough to drive price and support higher pay-out, as seen in Fidelity Bank and GTCO, among others.
Also during the week, Stanbic IBTC released the manufacturing Purchasing Managers’ Index for August showing that private sector business activities recorded the softest expansion in five time at 50.7 point against 51.7 points in July. This is below expectation and calls for serious attention from the government and its new ministers, given the obvious foreign exchange market hiccups and it high rate of volatility. It is noteworthy that in any uncertainty or challenging environment, there are opportunities for discerning investors and smart traders, following which this is the time to look at the sectors or industries with the upside potential to create value.
Buying interests and positive sentiments continued as portfolio rebalancing and sector rotation persisted in the face of the latest positive corporate earnings in the market that are yet to impact much on the prices of most equities due to the seeming high yields in TB and rising inflation. Institutional investors seem to be quiet in the market as revealed by the prevailing low volume of transactions. They have continued to digest these emerging numbers, but it looks like smart money is gradually starting to accumulate position in those companies which scorecards that beat expectation on NGX recently. Also, the market expects positive news or policies of government to support the sector or company performance going into the future. Noteworthy also is the fact that some corporate results came below expectation, especially some blue chip companies and medium cap stocks that posted mixed and even disappointing numbers. As such, let your stop-loss and exit strategies guide you at a time like this.
Market technicals for the period as revealed by sentiment reports indicated 100% buy position and money inflow reading 90.57, hence the need for investors to navigate the market now that many stocks are fairly priced in the midst of mixed macroeconomic and corporate numbers. The market situation of low traded volume and uptrend in the face of technical pattern of markup phase and strong momentum that signal that continuation of trend or reversal, as bargain hunters take advantage of volatility and relatively low prices to position in fundamentally sound stocks, especially among the banking stocks and others.
To navigate the Q3 market volatility and the rest of the year’s mixed outlook profitably using fundamental and technical analyses to run, join investdata live sessions at noon every trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy. As volume of transaction witnessed within the week remain above the average traded volume, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
Oil price continued its oscillation, as it rebounded to trade at five months high of $88.55 per barrel in the midst of output cut and expectation rate hike pause by Fed as inflation continue cool. We note the rising geopolitical tensions and supply disruptions due to the Russia-Ukraine war that has lingered for more than a year now, and is indeed escalating. The up and down movement of oil prices also continues to drive volatility across different investment windows.

Movement Of NGXASI
The NGX recorded another strong outing of four trading sessions of up market and one day of profit taking, amid buying interests in highly priced stocks and other blue chips that supported the breakout and uptrend witnessed during the week.
The positive dynamics in the market was driven by market revaluation, impressive numbers banking results and higher interim dividend payout, as other first tier banks are likely to follow suite in the face of portfolio rebalancing on the strength of money flow and happening in the international market.
The week trading session started in the green, extending the previous gains, after appreciating by 0.90%, which was sustained on Tuesday when it recorded 0.51% northward, before pulling back slightly by 0.08% on profit booking at midweek. There was a rebound on Thursday and Friday as the composite index gained 0.16% and 1.47% to record the market all-time high on bull run and improved buying sentiment. This brought the week’s total gain to 3%, compared to the previous week’s 1.29% growth.
In all, the NGX All-Share Index gained 1,968.28bps, closing at 67,527.19bps from the previous week’s 65,558.91bps, representing 3.00% growth after touching an intra-week high of 67,527.19bps from its lows of 65,558.91bps. Similarly, market capitalisation rose by N1.08tr, also representing a 3% value gain, closing at N36.96tr from opened value of N35.88tr.
The week’s top advancers’ table was dominated by low and medium priced stocks, amidst buying sentiment and strong momentum, as volatility continued. Also notable was accumulation of position and buying pressure, while market players navigate the changing economic fundamentals and trading environment. So far, traders are revealing the upside potentials and inherent value in some companies with strong earnings power and volume patterns ahead of more half year earnings reports with interim dividend. So, buying into value, strong earnings and high dividend payout companies remain the way to go, as price correction and dividend growth impacts positively on dividend yields.
Market breadth for the week turned positive as gainers outpaced losers in the ratio of 55:32 on buying sentiments of 100% and 0% sell volume. Money Flow Index is looking up to read 90.57bps, from the previous week’s 90.35points, an indication that funds entered the market on a weekly time frame. The candlestick formation of the market’s index on a weekly time frame revealed a bullish sign and beginning of markup phase, as money market yields and rates outlook remain mixed, and position taking in value stocks persisted, amidst rising inflation rate. There is also Impacts of the ongoing economic reform of the new government and expectation on new ministers to rollout their short, medium and long strategies to transform their different ministry and sector.

NGXASI Weekly Chart

The NGX index’s action on the weekly chart revealed a breakout pattern, as 2008 resistance turn support on a low traded volume to signal continuation or reversal in the face of buying sentiments, as the market remains strong in the midst of increased volatility. We note also that the index is trading above ‘T’ line and strong support level of 67,000 points, as NGX trades above the 50- and 200-day moving average. The candlestick formation, at the end of the week, showed buyers are in control, as investors and analysts digest financials and other factors to reposition their portfolios for Q3 end and beyond. The candlestick pattern indicates continuation of the trend, depending on market forces in the new week.

Bullish Sectoral Indices
Sectoral performance indexes were in green, led by NGX Consumer goods after gaining 7.58%, followed by Energy, Banking, Industrial goods and Insurance with 5.36%, 5.11%, 1.98% and 0.80% respectively.
Activities in volume and value were up as players transacted 2.87bn shares worth N37.05bn, compared to the previous week’s 1.81bn units valued at N29.30bn. Volume was driven by financial services, Conglomerates and Consume goods industry. Specifically, volume was boosted by trading in shares of Transcorp, SterlingNG, Fidelity Bank, Dangote Sugar and Nascon.
Omatek and Nahco were the best-performing stocks, gaining 53.33% and 41.80% respectively, closing at N0.46 and N25.95per share on market sentiment and forces. On the flip side, the share prices of CWG and John Holt lost 19.80% and 14.38% respectively at N4.01 and N1.31 per share, on back of profit taking,

Outlook for the week
We expect the mixed sentiments to continue on profit taking and reaction to corporate earnings as they hit the market, ahead of first-tier banks corporate earnings in the face of sector rotation and more policy pronouncement. These are coming in the midst of, corporate actions, price adjustment and payment dates. However, retracement to the 65,578.12bps level and below is possible on profit-taking as global and domestic events unfold.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605