Market Update for June 29
The bull resurfaced on the nation’s stock market Tuesday, a day to the quarter end, thereby halting the two consecutive sessions of decline on a high traded volume and wide positive market breadth to signal renew buying interests in the midst of seeming window dressing and portfolio rebalancing ahead of earnings expectation and dividend declaration from March year end accounts and half-year interim dividend paying companies.
The seeming positive sentiments returning to the market after first half of the year had decline by 2,612.46 basis points to create new entry opportunities for discerning investors and traders as the market remain within the value area of breakout, or breakdown of support and resistance level. This is just as the market crosses over to Q3 and the second half of the year ahead of earnings reporting season, while the March year-end accounts hit the market with audited financials and dividend payouts. Flourmills Nigeria and University Press presented their audited accounts, declaring dividend of N1.65 and 5 Kobo respectively for the financial year ended March 31, 2021.
Despite the mixed trend and weak economic data, we expect the bulls to return to the market as players reposition in dividend paying stocks, ahead of Q2 numbers and dividend announcement. However, we advise investors and traders to position wisely in fundamentally sound stocks with basic positive technical chart patterns and sentiments.
Technically, the NGX index action has formed a double bottom and zigzag chart patterns that supports an uptrend, but requires volume which surfaced during Tuesday trading with a bullish candlestick formation to confirm direction in Q3 and insights what should be expected in second half. Market recovery at this point may be powerful, depending on the state of the expected numbers with possibility of maintaining what we saw in 2020 and the Q1 corporate earnings.
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Tuesday’s trading opened in the upside and oscillated throughout the session on positioning in financial services stocks and others that pushed the composite NGXASI to an intraday high of 37,640.74 basis points from its lows of 37, 555.30ps.
Market technicals were positive and strong,with volume traded higher than previous day, in the midst of positive breadth and buying pressure as revealed by Investdata’s Sentiments Report showing 100% ‘buy’ position. Total transaction volume index stood at 1.10 points, just as energy behind the day’s performance was relatively weak, as seen in the 29.73pts Money Flow Index, compared to previous day’s 37.11pts, indicating that some funds left the market despite closing up.
Index and Market Caps
At the end of Tuesday’s trading, the NGX All Share Index gained 55.50bps, closing at 37,640.75bps, from an opening level of 37,585.25bps, representing a 0.15% up, just as market capitalization roseby N28.93bn, closing at N19.62tr, from its opening value of N19.59tr, representing a 0.15% value gain.
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The day’s uptrend was driven by buying interests in Stanbic IBTC, Zenith Bank, FBNH, Sterling Bank FCMB, NB, Okomu Oil, Dangote Sugar, Vitafoam, Cadbury, and Honeywell, among others. This mildly impacted on Year-To-Date loss, cutting it to 6.53%, while the drop in market capitalization YTD stood at N1.18 trillion, representing a 6.80% drop from its opening value for the year.
Bullish Sector Indices
The sectorial performance indexes were up, except forNGX Oil/Gas that closed 0.86% lower, while the NGX Insurance led the advancers after gaining 2.22%, followed by ConsumerGoods and banking with 0.29% and 0.25% higher respectively. While Industrial goods was flat.
Market breadth turned positive as gainers outnumbered losers in the ratio of 28:13, while activities in volume and value terms were mixed after stockbrokers transacted 229m shares worth N2.73bn from the previous day 163.5m units valued at N3.44bn. This volume was driven by trades in FCMB, Custodian Investment, GTCO, Zenith Bank and Jaiz Bank.
Ikeja Hotel and Linkage Assurance were the best performing stocks after gaining 10% each, closing at N1.21 and N0.77 per share respectively on market forces. On the flipside, Jaiz Bank and Veritas Kapital Assurance lost 5.17% and 4% respectively, closing at N0.55 and N0.24 per share, on profit taking.
Market Outlook
We expect sustained trend being the last trading day of the quarter after forming a chart pattern that supports an uptrend as we wait to confirm the trend at midweek’s market forces, as bargain hunters take advantage of pullbacks to reposition ahead of the quarter-end and earnings season. It is noteworthy that oil price continues its recovery at the international market with full-year and interim dividend possibilities around the corner.
We note also that some stocks are trading within their buy ranges to become more attractive at this point for income investors and traders, even as the market anticipates positive news, while oil price continues to oscillate above $73pb to support global economic and stock market recovery across climates. We also expect the ongoing COVID-19 vaccination to support global and domestic economic recovery that will enhance the market and give direction.
The banking sector and others remain attractive on the back of the prevailing low prices, despite the Q1 mixed numbers.
Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities ahead of interim dividend announcement. This is especially given that despite the seeming improvements, fixed income yield continues to offer negative real rate of return due to the galloping inflation.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by expected Q2 earnings reports, until the next MPC meeting in July.
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