Mixed Trend, Amid Profit-Taking, Positioning Ahead Of Positive News, Economic Data
Market Update for June 7
Trading on the Nigerian Stock Exchange (NSE) on Monday had a mixed and volatile session, closing marginally lower on the back of zero positive news that is capable of boosting the market, following which stocks gave back a small portion of last Friday’s gains on an above average traded volume and negative breadth.
The profit booking or selloffs witnessed on the first trading session of the week, could also be attributed to the impact of FGN saving bonds opening at higher coupon rates or yields as government continued to borrow at higher cost to finance its projects. Subsequently, the one and two-year tenor rates stood at 8.89% and 9.8% respectively.
The mixed sentiments witnessed on Monday were due to profit taking in blue chip stocks and low priced equities that rallied recently, as the market retraced up. Despite the mixed sentiment, however, the NGX index action still closed above its 14 and 20-Day Moving Average, just as Money Flow Index is looking up at 51.10 points. It is also important to note that MACD remains bullish after crossing the signal line.
Also on Monday, share prices of BOC Gases, Skyway Aviation and NEM Insurance were adjusted for dividends recommended by their directors and approved by shareholders.
With the way the horizon is tilting, investors should change their perception and trading strategies as part of measures to stay ahead of the market, thereby ensuring that you are among the few who make money from equities’ trading. This is possible through regular learning of technical analysis and candlestick patterns, an advantage offered by Investdata’s Comprehensive Stock Market trading videos and literature provide, covering fundamental and technical analyses that help you make effective and profitable trades.
Meanwhile, Monday’s trading opened slightly on the downside and oscillated for the rest of the day on profit taking and positioning pushed the benchmark index to an intraday low of 38,669.01bps, from its highs of 38,726.10bps, and thereafter closed slightly below its opening level at 38,688.98bps.
Market technicals were weak and mixed as volume traded was higher than previous day’s in the midst of breadth favoring bears on selling sentiment as revealed by Investdata’s Sentiments Report showing 35% ‘buy’ volume and 65% sell position. Total transaction volume index stood at 0.83 points, just as the momentum behind the day’s performance was relatively weak, even as Money Flow Index looked up to 51.10pts, from the previous day’s 43.63pts, indicating that funds entered the market, despite closing lower.
Index and Market Caps
The NGX All Share index, at the end of Monday’s session, shed 37.12bps, closing at 38,688.98bps from an opening figure of 38,726.10bps, representing a 0.10% drop, just as market capitalization fell by N20.69bn, closing at N20.16tr from the opening value of N20.18tr, representing a 0.10% value loss.
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The session’s downturn was due to selloffs in Guaranty Trust Bank, Zenith Bank, Unilever, UBA, UBN, FCMB, Ucap, Lafarge Africa, Oando and GSK, among others, a situation that mildly impacted Year-To-Date loss, increasing it to 3.93%, while market capitalization YTD stood at N864.48bn, representing a 4.39% drop below its opening value for the year.
Bearish Sector Indices
Performance indexes across sectors were down, except for the NGX Oil/Gas that closed 0.31% higher, while the NGX Insurance led the decliners afterlosing 1.30% followed by Banking, Consumer and Industrial goods that were down by 0.86%, 0.09% and 0.07% respectively.
Market breadth turned negative, as decliners outnumbered advancers in the ratio of 28:13; while transactions in volume and value terms were mixed, as investors exchanged 210.75m shares worth N1.5bn. The day’s volume was driven by trades in FBNH, Coronation Insurance, Chams, Zenith Bank and Japaul Gold.
Morison Industry and Conoil were the best performing stocks, gaining 9.73% and 9.63%, while closing at N1.24 and N20.50 per share respectively on market forces and 2020 dividend of N1.50. On the flipside, Juli Pharms and Computer Warehouse Group lost 9.93% and 9.80% respectively, closing at N1.36 and N1.38 per share, on selloffs.
Market Outlook
We expect a mixed trend as profit taking and positioning continue 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, as high yields in the fixed income market depress equity market. 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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