Mixed Performance Ahead, As Investors Bet On Interim Dividend, 52-week Low Stocks

Market Update for August 5
The nation’s stock market on Monday had a volatile and mixed session, regaining a positive sentiment to reverse Friday’s negative stance on a seeming increase in volume traded largely driven by the transaction in the shares of Sterling Bank.
The slight gain recorded is attributable to portfolio repositioning as market players interpret the numbers released during the just concluded earnings season while aligning their positions with the reports.

Also, the much-awaited news about the acquisition bid by Olam International Limited for Dangote Flour Mills was released during the day’s trading, with a revised price of N24 per share, down from the previous N26 each. This, nonetheless, triggered demand for the stock, despite the less than expected Q1 and half-year score-cards so far presented, just as the reviewed price is still coming at a juicy discount to the day’s N18.50 opening price of the stock. This impacted the market positively, as it closed marginally higher.

Notwithstanding Monday’s seeming rebound, many traders and investors remain cautious, preferring to wait for a clear direction before jumping into any position, especially with the political risk on the increase, going by the nationwide protest against the way things are going in the country, tagged #RevolutionNow march which kicked off Monday. While one of the arrowheads, Omoyele Sowore was arrested by the Department of State Service (DSS) on Sunday, to forestall the protest across major cities in the country, it nonetheless held in Lagos and Abuja, with Police firing live bullets and teargas at the protesters, and in the process injuring some. Some, including journalists, were also arrested.

Meanwhile, the benchmark Nigerian Stock Exchange (NSE) All-Share index opened the day’s trading on the downside, extending of the previous day’s negative sentiment on the back of weak earnings. It, however, turned green between midday to the afternoon on demand for medium cap stocks, after touching intraday low of 27,615.46 bases points from a high of 27,669.38bps to close the session higher on positive breadth.
At the end of Monday’s trading, Zenith Bank, Dangote Sugar, Conoil, ETI and Fidelity Bank hit new 52-week lows, while BOC Gases touched a new height.

Index and Market Cap
At the end of trading also, the NSEASI closed 38.92bps up, closing at 27,669.38bps after opening at 27,630.48bps, representing 0.14% growth, just as market capitalization rose N18.97bn up, closing at N13.48tr, from the previous day’s N13.47tr, which also represented 0.14% value gain.

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The day’s advance was helped by buying interest in MTN Nigeria, Flour Mills, Cement Company of Northern Nigeria, Dangote Flour Mills, UBA, Boc Gases and Oando, which reduced the NSE’s Year-to-Date loss to 11.97%, just as YTD market capitalization gain inched to N1.41tr or 14.43% from the year’s opening level of N11.72tr.

Mixed Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Industrial goods, as well as the oil/gas sector that closed 0.67% and 0.16% respectively, while the banking index led the decliners’ after shedding 0.55%, followed by the consumer goods index with 0.05% and next was Insurance with 0.03%.

Market breadth turned positive as advancers outnumbered decliners in the ratio of 18:12; market activities were mixed with volume traded up 73.65% to 280.7m shares from the previous day’s 161.65m units, while transaction value dropped by 70.62% to N1.41bn, as against Friday’s N4.8bn. Volume was driven by trading in financial services and consumer goods stocks like Sterling Bank, Zenith Bank, Dangote Flour, Ecobank Transnational Incorporated, and FBN Holdings.

Dangote Flour and Cornerstone Insurance were the best-performing stocks, after gaining 10% each and closing at N20.35 and N0.22 per share respectively on the revised bid price (READ MORE), and market forces. On the flip side, ETI and NPF Microfinance Bank lost 10% and 8.53% respectively to close at N7.20 and N1.18 on market forces.

Market Outlook
We expect the mixed performance to continue as market players digest the earnings reports released to reshuffle their portfolios in expectation of interim dividend-paying earnings reports. As bargain hunters take advantage of new 52-week low stocks as economic indices seemingly look positive. Discerning investors should target value stocks considering the current low valuation to position for dividend income and capital gain, especially as the market’s Price to Earnings ratio is 6.21x, which is well below the 11x average of its peers and a five-year average of 13.x. This revealed value and high upside potentials for a rally.

They may also take into consideration the expected economic reforms as the government is set to assign portfolio to the screened minsters, just as Central Bank of Nigeria (CBN) had earlier rollout it plans to boost productivity and investment by instructing the banks to lend more to the private sector. This is aimed at reducing banks’ participation in government securities and lending more to the private sector to drive economic growth.
There is also the likely impact of portfolio repositioning for the second half of the year in the midst of expected Q2 numbers, especially banking stocks.

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Ambrose Omordion
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