Market Update for August 10
Midweek’s trading on the Nigerian Exchange turned positive once again, halting two successive sessions of bear run as market players react to the better-than-expected corporate earnings and bargain hunters take advantage of the recent pullbacks to reposition their portfolios for robust returns. Also, the nation’s stock market joined its counterpart across the globe to close higher on the seeming positive US July inflation report that eased, closing lower at 8.6% from 9.1% in June, which signaled the high possibility of the Feds slowing down its tightening of the September monetary policy. This is also on the back of the positive job data, and the over 30% decline in oil prices over the last six months to trade below $100, just as gasoline price dropped below $3 per litre, from its high of $5 in recent months.
Back home, the renewed buying interests in high priced stocks and blue chip companies, especially those that suffered losses in the midst of the strong numbers posted by these companies, thereby revealing their undervalued state, as well as the high dividend yields which indicate the possibility of a higher payout as a hedge against the rising 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 of trade on Wednesday improved on a positive market breadth, despite the prevailing low liquidity, amid a positive sentiment and accumulation in blue chip stocks due to perception and reactions to the prevailing condition that has created ‘buy’ opportunities for discerning investors and traders that understand stock market dynamics. This is especially as these companies’ earnings performance beat market expectations to indicate their inherent value and the cheap state of these stocks.
The market reversed its loss breaking out the 50,000 mark again on a ‘buy’ sentiment to test 50,100 basis points. Traders see opportunities in the pullbacks 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 in 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.
Despite the rebound in the NGX index action, it is 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.
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Oil prices rebounded after pulling back to their six-month low on worrying signals from oil traders of a European exposure to recession, trading at $97.14 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.
Meanwhile, Wednesday’s trading opened slightly in the green and was flattish by midday before rebounding in the afternoon on buying interest in blue-chips, a situation that pushed the NGX’s index to an intraday high of 50,100.32bps from its lows of 49,342.71ps, before closing above its opening point at 50,075.47bps.
Market technicals were positive and strong, with higher volume traded than the previous day in the midst of breadth favoring bulls on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy volume. The total transaction volume index stood at 1.12points, just as momentum behind the day’s performance was weak as Money Flow Index is looking up at 38.89pts, from the previous day’s 33.87pts, indicating that funds entered the market.
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Index and Market Caps
At the end of midweek’s trading, the benchmark NGX All-Share Index gained 724.76bps, closing at 50,075.47bps, after opening at 49,350.71bps, representing a 1.5% growth, just as market capitalization rose by N390.92bn, closing at N27.01tr, from the previous day’s N26.62tr, which also represented a 1.5% appreciation in value.
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Midweek’s upturn was driven by position-taking in Dangote Cement, NEM, Guinness, Dangote Sugar, Zenith Bank, UBN, Fidelity Bank, Etranzact, International Breweries and Africa Prudential, among others, which impacted positively on Year-To-Date gain, which increased to 17.23%. Market capitalization gain YTD also rose to N3.53tr YTD, representing a 20.76% rise over the opening level for the year.
Bullish Sector Indices
The sectorial performance indexes were 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 turned positive as gainers outnumbered losers in the ratio of 20:10; just as transactions in volume and value terms were up, after players exchanged 279.22m shares worth N2.08bn, with volume driven by trades in Jaiz Bank, FBNH, UBA, Aiico and Japaul Gold.
Dangote Cement and NEM Insurance were the best-performing stocks, gaining 9.96% and 9.89% respectively, closing at N265.00 and N4.11per share respectively on low price attraction and market forces. On the flip side, Lafarge Africa and Nacho lost 8.84% and 8.62% respectively, closing at N23.20 and N5.30 per share, purely on market forces and profit taking.
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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