Market Update for August 05
The nation’s equity market, at midweek, again sustained an uptrend for the fourth consecutive trading session on increased buying interest by market players in agribusiness, healthcare and banking stocks. This supported the bull-run on a very high traded volume and reduced gaining momentum with mixed signals amidst the continued portfolio repositioning and rebalancing on the strength of the half-year earnings reports.
These, along with the interim and full-year dividend expectations will support the ongoing sectoral rotation among players, as the March year-end and half-year audited accounts from the banking and services sectors hit the market any moment from now.
Those expected to present audited full and half-year, which will be followed by proposal of full-year and interim dividends include: Learn Africa, Redstar Express, PZ Cussons, University Press, Northern Nigeria Flour Mills, Guaranty Trust Bank, Zenith Bank, Access Bank, the United Bank for Africa and Stanbic IBTC.
The improving sentiments and inflow into equity assets is revealed by Investdata sentiment reports and money flow index which crossed 50 points to read 57.89 points looking up on the daily chart, supporting a recovery market driven by better-than-expected earnings released so far despite the mixed numbers and prevailing economic realities. The market continues to resist further decline, trading above its 20-Day Moving Average since July 23 when it tested intraday low of 24,173.53 basis points.
Meanwhile, Wednesday’s trading opened on the upside and oscillated throughout the day on buying interests and profit taking from the recent rally. This pushed the NSE index to an intra-day high of 24,900.04bps, from its low of 24,650.16bps before closing the session higher at 24,882.04bps.
Midweek’s market technicals were positive and strong with volume traded higher than the previous day’s in the midst of breadth that favoured the bulls on a strong buying pressure as revealed by Investdata’s Daily Sentiment Report showing a ‘buy’ volume of 100%. The total daily transaction volume index stood at 1.92, just as impetus behind the day’s performance stayed relatively strong, with Money Flow Index reading 57.89 points, as against the previous 48.09ps, indicating entrance of funds into some stocks and the market at large.
Index and Market Caps
The benchmark NSE All-Share Index (NSEASI) closed the day’s trading session with a marginal 40.10bps gain at 24,882.04bps from the 24,841.94bps it opened, representing a 0.16% rise, same as market capitalization which inched N20.93bn up at N12.98tr from the opening value of N12.96tr which represented 0.16% value gain.
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The upturn was impacted by price appreciation by Guaranty Trust Bank, Presco, Chemical & Allied Products, GSK, 11 Plc, Access Bank, Stanbic IBTC, Fidelity Bank, United Capital, and Neimeth Pharm. This impacted mildly on the NSE’s benchmark index, reducing the Year-To-Date loss to 7.35%, while market capitalization YTD remained positive, at N668.51bn, representing a 1.90% increase over the year’s opening level.
Bullish Sector indices
The sectorial performance indexes were largely bullish except for the NSE Insurance that closed slightly down by 0.01%, while the NSE Oil/Gas led the advancers with an equally marginal gain of 0.11%, followed by NSE Banking, Industrial and Consumer Goods indexes that closed slightly up by 0.07%, 0.01% and 0.01% respectively.
Market breadth remained positive, as advancers outnumbered decliners in the ratio of 19:12, while activities in volume and value terms soared by 148.14% and 167.07% respectively after investors traded 383.29m shares worth N3.89bn, compared to the previous day’s 154.47m units valued at N1.46bn. The day’s volume was boosted by trades in FBNH, Access Bank, Zenith Bank, Presco and Sterling Bank.
The best performing stocks during session were sister companies- CAP and UACN Property which scooped 9.97% and 9.52% respectively, closing at N16.90 and N0.92 per share on low price attraction and market forces. On the flip side, Eterna and Livestocks lost 9.00% and 4.62% respectively to close at N1.82 and N0.62 per share respectively on selloffs and profit taking.
We expect the mixed outing to be sustained on profit booking and positive sentiments for Q2 numbers to continue on dividend expectations as portfolio rebalancing on the strength of half-year earnings already released, in the midst of the March/May full-year accounts and interim dividend from the banks.
Also, there is the expected impact of positive news of a Coronavirus vaccine and CBN policies on the economy, even as investors are stilled worried about inconsistent government policies which have continued to dampen confidence.
This is likely to support volatility, thereby creating new entering opportunities. Money flow index continues to look up at 41.58 despite flowing from one sector to the other, seeking value in terms of low prices with high upside potentials.
With the earnings reporting season gradually coming to end, there are opportunities still available as sectoral rotation continues, while sectors that have suffered oversold so far offer attractive risk-reward buy-opportunities and outlook for considerable short, medium and long term investment.
For immediate liquidity or cash, we advise that you trade low priced stocks with serious caution to avoid being trapped. However, the market’s high dividend yield continues to attract buying interests, as few audited and unaudited corporate earnings will hit the market, going forward. This is despite the likely continuation of selloffs. Investors are buying to increase their positions in undervalued stocks on H1 numbers. It is also against the backdrop of the fact that the capital wave in the financial markets may persist in the midst of relatively low-interest rates in the money market, high inflation, and unstable economic outlook for 2020.
Again, the current undervalued state of the market offers opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation going forward. Also, traders and investors need to change their strategies, because of the NSE’s pricing methodology, the CBN directives, and their impact on the economy in the nearest future.
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