Portfolio Realignments, Uptrend May Persist, Amid Economic Data, Earnings Expectations
Market Update for the Week Ended June 11 and Outlook for June 15-18
Nigeria’s equity market last week sustained an uptrend to consolidate the previous week’s positive outing on strong buying interests and momentum as analysts and traders expect inflation data for the month of May in the new week, while keeping an eye on the expected half-year earnings reporting season and interim dividend declarations.
Before then also, investors are eagerly awaiting audited financials from the few March, April and May full-year accounts expected to hit the market any moment soon, even as their quarterly scorecards released before now must have revealed the earnings power. This is despite the changing trade patterns and environment now fueling market volatility in the midst of rising yields in the fixed income segment6, inflationary pressure and insecurity.
In all of these, there are huge opportunities to make money or create more wealth by buying right and avoiding major pitfalls that could push you into losses, which is why it is so critical and important that you acquire the knowledge, tools and strategies needed to stay ahead of current market situation. There is no better place to learn and boost your confidence than attending Investdata Q3 master class for improved trading and investing results.
The NGX index action during the week under review witnessed a breakout of the 39,000 mark as discussed, revealing strong recovery and consolidation, going by the fact that the market had suffered decline in May due to pullbacks and corrections.
The mixed performance recorded within the period shows strength in the recovery move, suggesting that any pullback at this point indicates the required strength to push the index above the 42,000bps, all things being equal. As such, investors should play the market intelligently, targeting small profit as they move with the trend. However, we remind investors that that profit taking is inevitable at any point in an equity market.
The less-than-average traded volume shows that some players are watching positions they already have taken, waiting for the next breakout levels of 39,494.70 and 39,674.48 basis points, after the NGX All-Share index action tested the 39,210 points that triggered another ‘buy’ opportunity for breakout traders.
For the Nigeria economy to achieve the stronger 1.84% GDP growth expected in the latest World Bank forecast released during the week, the fiscal and monetary authorities must formulate policies and execute them as envisaged in the projection for the 2021 year-end, as against the 0.51% recorded in Q1.
Movement Of NSEASI
It was a mixed week of positive sentiment and buying interests, extending the previous week’s bullish rebound as the key performance index recorded three sessions of up market, while it was down in two due to profit taking.
The NGXASI closed on the first day of the week with a 0.08% drop, before rebounding on Tuesday, when it gains 0.50%, a move that was sustained at midweek and Thursday, when it gained 0.74% and 0.10% respectively. It however suffered a marginal 0.11% decline on Friday arising from profit booking by investors. This left the week total gain at 1.11%, compared to previous week’s 1.23% notch.
Consequently, the composite NGX index gained 430.18 basis points, closing at 39,156.23bps from an opening level of 38,726.10bps, touching an intra-week high of 39,262.71bps from its lows of 38,661.48bps, on sustained buy interests in high cap and blue-chip stocks. Within the same period, market capitalization rose by N224bn, closing at N20.41tr, compared to previous week’s N20.19tr, which also represented a 1.11% gain.
The week’s advancers table was dominated by medium cap stocks, as portfolio repositioning continued ahead of economic data and Q2 earnings expectations. Also, trading and price actions revealed the presence of smart money in the market, which impacted positively on the sectorial indexes as four sectors closed higher, despite price adjustment in six companies. They are: BOC Gases, NEM Insurance, Skyway Aviation, Beta Glass, Jaiz Bank, and Stanbic IBTC for dividends and scrip issues declared by their boards.
The week recorded a slight negative breadth with decliners almost equal advancers in the ratio of 36:35 on 82% buying sentiment and 18% sell volume,as Money Flow Index looked up, reading 48.69bps, from the previous week’s 40.65 points. An indication that funds are entering the equity space.
NSEASI WEEKLY CHART MOVEMENT
The systematical triangle-chart pattern formation of the NGX Index action supports a continuation of the uptrend, depending on market forces in the new week. The candlestick is yet to give any signal on a weekly and daily chart.
This is happening at a time crude oil sellingabove $71.64 per barrel level at the international market, as more economies reopen for business activities while the Covid-19 vaccination is on a high gear at the global and domestic levels. There is also the impact of positive economic data from U.S and China that would support oil prices.
Bullish Sectoral Indices
Performance indexes across the sectors were up, except for the NGX Insurance index that closed 4.12% lower, while the NGX Industrial goods led the advancers, after gaining 2.36%, followed by Oil/Gas, Consumer Goods and Banking that closed higher by 1.37%, 1.06% and 0.89% respectively.
The general market’s outlook remains mixed in the short and long-term, following which investors should take short and medium-term positions, while diversifying their portfolios along long-term trades to protect capital. This, you should do, by considering sectors with high upside potentials on the strength of earnings and policy influence.
Transactions in volume and value terms were mixed as investors traded 1.06bn shares worth N12.83bn, compared to the previous week’s 1.08bn units valued at N9.55bn. Volume was driven by trades in Financial Services, Consumer goods and ICT sectors, particularly Zenith Bank, Sterling Bank, Fidelity Bank, FBNH and Vitafoam.
Cutix and Okomu Oil were the best performing stocks for the week after gaining 23.56% and 20.73% respectively, and closing at N2.78 and N116.50 per share on full-year and half year earnings expectation. On the other hand, CWG and FTN Cocoa lost 26.14% and 15.38% respectively, at N1.13 and N0.33per share,on selloffs.
We expect mixed performance on profit taking and portfolio readjustments on the recent rally, as all eyes are on economic data and Q2 corporate earnings, in the face of rising fixed income market yields. Also, any breakout at this point offers new entry opportunities for traders and investors to reposition in value and underpriced growth stocks, while companies with March year-end accounts release their audited full-year numbers to support recovery. This is based on the fact that the rise in fixed income yields may not be enough to scare all investors away from the equity market.
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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