NGXASI Soars, As Medium, Large Caps Propel Recovery, Ahead Of Earnings Reports

Market Update for June 9

The positive outing on the Nigerian Stock Exchange continued at the midweek with the composite index NGX All-Share Index closing north for the second successive session, joining its global counterparts amidst rising yields, inflation and the expected earnings reporting season.

The recently increasing sentiment and momentum reflected in the trading and price pattern, an indication of rekindled investor interests and confidence, despite what is happening in other investment windows. This is because discerning wealth builders are looking at where there is consumption and demand, capable of impacting positively on company numbers as they hedge against the galloping inflation. 

Despite the less-than-average traded volume today, the money flow index on the daily and weekly timeframe are showing the presence of smart money in the equity space, even as blue chip and low priced stocks across sectors are looking at breaking out the recent resistance levels of 39,000 and 39,022.52 on a positive breadth.

As discussed during our Q & A Session over the weekend and stressed in one of our reports, a breakout of the 39,000 mark will reveal strong recovery and consolidation, going by the fact that the market had suffered decline in May due to pullbacks and corrections.

The NGX index action movement on Tuesday and Wednesday shows strength in the recovery move, meaning any pullback at this point indicates stronger strength that will push the index above 42,000 all things being equal. As such, investors should play the market intelligently, targeting small profit as they move with the trend.  However, we must note that profit taking is inevitable in any equity market.

Meanwhile, midweek’s trading opened on the upside and was sustained throughout the session on buying interests in blue-chip stocks, among others, a situation that pushed the NGX index to an intraday high of 39,177.51bps from its lows of 38,881.70bps. Thereafter, the index closed above its opening figure at 39,170.93points.

Market technicals were positive and mixed with lower traded volume than previous day in the midst of breadth favoring the bulls on positive sentiment, as revealed by Investdata’s Sentiments Report showing 98% ‘buy’ volume and 2% sell position. Total transaction volume index stood at 0.76 points, just as momentum behind the day’s performance was relatively strong, as seen in the 63.39.pts Money Flow Index, compared to previous day’s 57.59pts, indicating that funds entered the market.

Index and Market Caps

The benchmark NGXASI closed the session with a 289.25bps gain, at 39,170.95bps from an opening figure of 38,881.70bps, representing a 0.74% growth, just as market capitalization soared by N150.76bn, closing at N20.42tr, compared to its opening value of N20.27tr, also representing a 0.74% value gain.

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Midweek’s upturn followed buying interests in Okomu Oil, Dangote Cement, Zenith Bank, Lafarge Africa, NASCON Allied, Flour Mills, Vitafoam, Stanbic IBTC, Guaranty Trust Bank, and United Capital, among others. This impacted positively on Year-To-Date loss, reducing it to 2.73%, while the drop in market capitalization YTD dropped to N639.94bn, representing a 3.02% drop below its opening value for the year.

Bullish Sector Indices

All the sectorial performance indexes closed higher, led by the NGX Industrial Goods, which notched 1.33%, followed by Banking, Insurance, Consumer and Energy that were up by 1.25%, 0.37%, 0.28% and 0.03% respectively.

Market breadth, turned positive, as advancers overwhelmed decliners in the ratio of 25:7; while transactions in volume and value terms were mixed, after investors exchanged 181.53m shares worth N3.96bn, compared to the previous day’s 218.51m units that changed hands for N1.59bn. The day’s volume was driven by trades in Zenith Bank, Sterling Bank, GTBank, FBNH and Fidelity Bank.

The best performing stocks during the session were Cutix and Okomu Oil which gained 10% and 9.75%, closing at N2.53 and N116.50 per share respectively on earnings expectation and market forces. On the flipside, Sovereign Trust Insurance and Jazi Bank lost 3.57% and 3.39% respectively, closing at N0.27 and N0.57 per share, on profit taking.

Market Outlook

We expect a stronger buy market as revealed by the six technical indicators and five moving averages, but the possibility of profit booking is high, depending on market forces as positioning continues in expectation of positive news, economic data and others in the midst of oscillating oil price and global economic and stock market recovery across climates. We also expect the ongoing vaccination to support global and domestic economic recovery that will support 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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