Equities

Profit-Taking May Slowdown Buying Momentum, On Sustained Positioning

Market Update for June 10

The bullish transition on the Nigerian Exchange continued on a low momentum, closing Thursday’s trading marginally higher, as investors buying sentiment remained high, despite the low traded volume that persisted.

The high buying pressure and inflow of funds into the equity space shows institutional investors or smart money are taking position ahead of economic data and half year earnings reporting season that are around the corner. This suggest that discerning investors and traders should look the way of sectors and companies with high consumption and demand, capable of impacting positively on company numbers, while hedging against the nation’s galloping inflation. 

The prevailing low traded volume shows that some market players are watching positions they already have taken, looking for the next breakout levels of 39,494.70 and 39,674.48 basis points, after the NGX All-Share index action had crossed 39,200 points to trigger another ‘buy’ opportunity for breakout traders. On the strength of this changing momentum, trading and price patterns for many stocks, as well as profit taking possibility is high, paving way for a stronger recovery that may push the index above the previous high. There are new ‘buys,’ as NGXASI maintained uptrend.

Thursday’s trading started slightly on the downside before oscillating for the rest of the session on continued positive sentiment and buying interests in banking and consumer goods stocks, a which pushed the composite index to an intraday high of 39,210.10bps where it closed, from its lows of 39,159.50bps on a positive breadth.

Market technicals were positive and mixed with lower traded volume than previous day in the midst of breadth that favoured the bulls on high buying sentiments, as revealed by Investdata’s Sentiments Report showing 100% ‘buy’ volume. Total transaction volume index stood at 0.65 points, just as energy behind the day’s performance was relatively strong, as seen in the 69.24.pts Money Flow Index, compared to previous day’s 63.39pts, indicating that funds entered the market.

Index and Market Caps

At the end of Thursday trading, the key performance index NGXASI inched up by 39.15bps from an opening figure of 39,170.95bps, representing a 0.10% rise,  just as market capitalization grew by N20.41bn, closing at N20.44tr from its opening value of N20.42, also representing a 0.10% value gain.

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The session’s upturn was driven by buying interest in Guaranty Trust Bank, Zenith Bank, Unilever Nigeria, Access Bank, Vitafoam, Stanbic IBTC, PZ Cussons, FCMB, Ecobank Transnational Incorporated, and Fidelity Bank, among others. This impacted mildly on Year-To-Date loss, reducing it to 2.63%, while the drop in market capitalization YTD reduced to N619.53bn, representing a 2.89% drop below its opening value for the year.

Mixed Sector Indices

Performance indexes across sectors were mixed, as NGX Banking and Consumer Goods closed 0.52% and 0.44% higher respectively, while the NGX Insurance led the decliners, after shedding 1.04%, followed by Industrial goods with 0.01% down.

Market breadth, remained positive, as gainers overwhelmed losers in the ratio of 19:15; while activities in volume and value terms were down, after stockbrokers traded 158.37m shares worth N2.24bn, compared to the previous day’s 181.53m units valued at N3.96bn. Volume was driven by trades in Zenith Bank, Sterling Bank, UBA, Transcorp and charms.

Linkage Assurance and PZ were the best performing stocks during the session, as they gained 9.09% and 7.14%, closing at N0.60 and N6.00 per share respectively on market forces and earnings expectations. On the flipside, Computer Warehouse Group and CHI Plc lost 9.60% and 8.97% respectively, closing at N1.13 and N0.71 per share, on selloffs and profit taking.

Market Outlook

Being the last trading day of the week, profit-taking may slowdown the buying momentum as revealed by the six technical indicators and five moving averages, but there is a possibility of trend continuing, depending on market forces on sustained positioning. This is in anticipation of positive news and economic data 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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CRO|Investdata Consulting Ltd

info@investdataonline.com

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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