Release Of Interim Dividend Banking Results May Spur Mixed Sentiments, Bargain Hunting

Market Update for August 24

Midweek’s trading activities on the Nigerian Exchange rebounded after two consecutive sessions of negative outings in the midst of positive sentiments and weak momentum, with the composite NGX All-Share index making lower lows and lower highs to remain on a corrective wave, below 49,000 basis points’ marks on a low traded volume and positive market breadth.

Market metrics at the close of the session turned green in the face of market decline and impressive corporate earnings, enhanced by the audited half-year financials presented on Tuesday by Zenith Bank and Stanbic IBTC Holdings, which beat analysts’ expectations. Directors of both companies proposed 30 kobo and N1.50 interim dividends respectively, triggering ‘buy’ interests in financial stocks, supporting the positive sentiments and NGX index.

However, price corrections in large cap companies and retracement in the prices of some blue-chips at the end of Wednesday trading signaled strength for rebound and higher upside potentials for value and growth stocks with stronger earnings that had suffered losses in this recent wave. At this point, traders should try a new strategies or experiments. Do not be upset with the market mood. Track the new strategy to measure if you are making head ways, because the factors against the market are many now. You can equally, take break to watch the market because things are changing and some of them are beyond your control.

Meanwhile, market volatility continues to support technical traders in the midst of prevailing mixed sentiments, which was due to the corrective move and position taking by bargain hunters taking advantage of the prevailing relatively low prices of stocks and blue chip companies relative to value. This is especially true of those that suffered losses in the midst of the strong numbers posted by these companies, thereby revealing their undervalued state, as seen in the high dividend yields pointing the possibility of a higher payout as a hedge against the soaring inflation.

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 impressive 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.

The NGX index’s action  trades below the ‘T line’ and the 50-day moving average exponential, just as it tries to rebound on bargain hunting as sector rotation and portfolio rebalancing increased amidst expectation of more  interim dividend paying bank results.  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 sustained its rebound, trading at $100.60 per barrel in the international market, following fear of output cut by OPEC, in the midst of seasonal demand, US inventory report hit 35 year low, china weak economic data and fear of recession that linger on increasing geopolitical tension. 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, midweek’s trading opened slightly in the upside and it was sustained, despite oscillating on buying interest in blue chip stocks, a situation that pushed the NGX’s index to an intraday high of 48,681.00bps from its lows of 48, 554.76ps, before closing above its opening figure at 48,675.33bps.

Market technicals were positive and mixed, with lower volume traded than the previous day in the midst of breadth favoring bulls on a buying dentiment as revealed by Investdata’s Sentiments Report showing 96% buy volume and 4% sell position. The total transaction volume index stood at 0.97points, just as impetus behind the day’s performance was relatively weak as Money Flow Index is looking down at 36.01pts, from the previous day’s 41.85pts, indicating that funds left the market, despite the up market.

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Index and Market Caps

The benchmark NGXASI at the end of the day trading gained 120.57bps, closing at 48,675.33bps, after opening at 48,554.76bps, representing a 0.25% up, just as market capitalization rose by N65.36bn, closing at N26.25tr, from the previous day’s N26.19tr, which also represented a 0,25% value gain.

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Wednesday’s upturn was driven by position taking in Nestle, BUA Cement, Stanbic IBTC, ETI, NEM, Cutix, Fidelity Bank, NGXGroup and Oando, among others, which impacted positively on Year-To-Date gain, increased to 13.95%.  Market capitalization gain YTD also rose to N2.89tr YTD, representing a 17.75% rise over the opening level for the year.

Bullish Sector Indices

The sectorial performance indexes were in green, led by NGX Insurance after gaining 2.17%, followed by Banking, Industrial, Energy and Consumer goods with 0.56%, 0.47%, 0.16% and 0.09% respectively.

Market breadth turned positive as gainers outnumbered losers in the ratio of 16:11; just as activities in volume and value terms were mixed, after players exchanged 167.57m shares worth N3.37bn, with volume driven by trades in Accesscorp, UBA. FBNH, GTCO and Zenith Bank.

NEM Insurance and Stanbic IBTC were the best-performing stocks, gaining 10% and 8.93% respectively, closing at N4.84 and N30.50per share respectively on market forces and impressive earnings with interim dividend. On the flip side Fidson Healthcare and FTNCocoa lost 9.80% and 9.09% respectively, closing at N9.11 and N0.30 per share, purely on profit taking.


Market Outlook

We expect a mixed sentiments to continue on bargain hunting and expectation of more banking results, amidst oscillating sentiments that had continued on portfolio reshuffling and sector rotation on bargain hunting as players interpret July inflation of 19.64% and 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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Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08179547605