Market Update for August 11
The recent seesaw movement on the Nigerian Exchange as revealed by the up and down trends in sentiments and momentum signals continued cautious trading in the face of an inflow of impressive corporate earnings reports and low liquidity, with all eyes on macroeconomic data and developments across the country. This is just as buying and selling patterns in highly capitalized stocks have sustained the market above the 50,000 basis points mark, and at the same time the oscillating mood.
The ongoing mixed sentiments is due to selloffs, pullbacks and bargain hunters taking advantage of the prevailing relatively low prices of stocks and blue chip companies relative to value. This is especially true of those that suffered losses in the midst of the strong numbers posted by these companies, thereby revealing their undervalued state, as seen in the high dividend yields indicating the possibility of a higher payout as a hedge against the soaring inflation, while all eyes are on the July Consumer Price Index report expected next week Monday from the National Bureau of Statistics (NBS).
The volume pattern since the beginning of the week and improving trend in money flow index suggests that position taking is ongoing, as Thursday’s trading sustained the positive market breadth, despite the down market, amid low traded volume and accumulation in blue chip stocks. The situation follows perception and reactions to the prevailing condition that has created ‘buy’ opportunities for discerning investors and traders that understand stock market dynamics, especially as these companies’ earnings performance beat market expectations to indicate their inherent value and the cheap state of these stocks.
Despite, the oscillating trend in the market, discerning investors are cashing in the pullbacks opportunities at this point, while continuing to digest the recent impressive corporate earnings that seems to impact the share prices and the market regardless of the low liquidity and confidence. It is noteworthy also that these numbers are revealing value and intrinsic upside potentials of these stocks.
While we note the effects of the increasing global volatility as a result of rising rates, inflation, geopolitical tension and slowing consumer spending, there are however, pockets of strength in some sectors amidst the better-than-expected earnings releases that offer insights into strong group stocks with value in the industries and companies in the various sectors. There is the possibility of sectors beating the next quarterly estimates and predictions, attaining their pre-pandemic performances as they deal with capacity in the midst of soaring costs and insecurity.
The NGX index action as at end of Thursday’s trading still trading below the ‘T line’ and the 50-day moving average, on retracement that attracts bargain hunters as sector rotation and portfolio rebalancing increased amidst the recent scorecards of many companies on the exchange. It is, therefore, time to use technical tools, if you have been ignoring the charts and fighting the trends, it is your chance to step up your game. At this current market mood, investors and traders should target leaders in the various sectors with strong fundamentals, and positive technicals as the market reversal is underway depending on the earnings power.
To navigate this month profitably using fundamental and technical analysis 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, while others are fearful, as seen in the recent range market. Despite the mixed sentiment witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”
Oil prices extended the ongoing rebound to trade at $99.91 per barrel in the international market, following the US’ positive economic data, especially the jobs report and slight drop in the July inflation figure. These are happening amidst the low factory activities in China, Japan and others that now signal demand fear, made worse by the weakened GDP in the US that may push the world’s largest economy into a technical recession. Already, central banks across the globe have continued to hike rates in the fight against rising inflation, in the midst of a sluggish economic growth data from China and others. All these have continued to influence the monetary policy options of central banks as they move to checkmate the impacts of the Russia-Ukraine conflict on the global economy to avoid the looming economic recession.
Thursday’s trading on the NGX started sharply in the green, but oscillated to pullback in the afternoon on selloffs in blue-chips, a situation that pushed the NGX’s index to an intraday low of 50,009.12bps from its highs of 50,256.83ps, before closing below its opening point at 50,014.60bps.
Market technicals were weak and mixed, with lower volume of shares traded than the previous day in the midst of breadth favoring bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 98% sell volume and 2% buy position. The total transaction volume index stood at 0.75points, just as momentum behind the day’s performance was relatively strong as Money Flow Index is looking up at 50.14pts, from the previous day’s 38.80pts, indicating that funds entered the market, despite the down market.
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Index and Market Caps
The benchmark NGX All-Share Index closed 60.87bps down at 50,014.60bps on Thursday, after opening at 50,075.47bps, representing a 0.12% drop, just as market capitalization fell by N32.83bn, closing at N26.98tr, from the previous day’s N27.01tr, which also represented a 0.12% value loss.
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Meanwhile, Thursday downturn was driven by selloffs in MTNN, Stanbic IBTC, GTCO, United Capital, Zenith Bank, UBN, Fidelity Bank, NEM, UBA, Caverton, International Breweries and Accesscorp, among others, which impacted mildly on Year-To-Date gain, which reduced to 17.09%. Market capitalization gain YTD also rose to N3.51tr YTD, representing a 20.64% rise over the opening level for the year.
Bullish Sector Indices
The sectorial performance indexes were slightly bullish, with the NGX Industrial Goods leading the advancers’ side, after gaining 4.35%, followed by Insurance, Banking, Consumer Goods and Energy with 1.91%. 0.42%, 0.33% and 0.06% respectively.
Market breadth remained positive as gainers outnumbered losers in the ratio of 20:15; just as transactions in volume and value terms were mixed, after players exchanged 133.59m shares worth N2.44bn, with volume driven by trades in UBA, Chams, Accesscorp, Japaul Gold and Jaiz Bank
Nahco and FCMB were the best-performing stocks, gaining 10% and 9.84% respectively, closing at N5.83 and N3.35per share respectively on impressive earnings and market forces. On the flip side, ABC Transport and Jaiz Bank lost 6.67% and 5.56% respectively, closing at N23.20 and N5.30 per share, purely on selloffs and profit taking.
Being the last trading day of the week, expect the mixed trends and sentiments to continue on bargain hunting as players react to the impressive half-year results in expectation of more company’s scorecards, especially from the first-tier banks in the midst of sovereign risks, as all eyes are on interim dividends. We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists. Analysts are also focused on the lookout for Q2 GDP and flow of funds amid oil prices oscillation. Also, the market continues to interpret the rising inflation in relation to the crude oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend-paying stocks in the hope of dividend announcements.
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