Mixed Sessions Ahead On H1 Earnings, Dividend News, Inflation Index, MPC Meeting
Market Update for the Week Ended July 9 and Outlook for July 12-16
The first full trading week of the month of July, which also ushered in the third quarter and earnings reporting season on the Nigerian Exchange had a mixed trend, closing the period marginally lower on an above-average traded volume. As a result, the market halted previous weeks of bull-run as low-priced stocks hit new highs, amidst profit-taking on blue-chip companies and selloff among the highly-priced equities, all of which slowed down the recovery move.
During the week, market participants continued to rebalance their portfolios ahead of the earnings season that kicked off with Infinity Trust Mortgage Bank presenting impressive numbers that may be giving an insight into what the half-year score-cards could look like. Besides all eyes already fixed on Q2 corporate earnings, there are also expectations for economic data and the July meeting of the Central Bank of Nigeria’s Money Policy Committee.
The continued notification of closed period and board meetings by directors of quoted companies for approval of their half-year financials may have triggered buying interests across sectors, including value and growth stocks of dividend-paying equities. We note also that the March year-end accounts may already be pointing the direction as to what investors should expect from the larger market, going forward. The summary is that some of these companies grew their payout while some had a dividend cut to reflect their performance for the financial year ended March 31, 2021, just as low priced stocks like Cutix, Learn Africa and UPDC Plc are trading on new 52-week highs.
The global economy and markets remain mixed despite the vaccination-driven economic recovery across climates, even as the World Bank has upgraded its economic growth outlook based on the ongoing vaccination, reopening of economies, and government policies at different levels. The developed markets during the week rebounded after early selloffs on strong economic outlooks and recovery.
Back home, the nation’s equity market suffered a setback on profit-taking and selloffs among the highly capitalized stocks ahead of earnings expectation in the midst of seeming economic recovery and oscillating oil prices above the national budget benchmark of $45 that had supported government expenditure and reflected for the first time in the nation external reserve after 11 weeks of decline. Implementation of the 2021 national budget continues, with a supplementary budget of over N900 billion underway. These will be helped by the CBN’s continued intervention in critical sectors to boost productivity needed to create employment and support the supply side and check inflation.
In the new week, we expect the release of the June consumer price index (CPI) by the National Bureau of Statistics (NBS) that would likely show a reversal in the inflation trend; just as the CBN’s Purchasing Managers Index (PMI) for June is not out yet.
Already, corporate actions and earnings reporting season have been extended to July and August for December, March, April, and May year-end accounts, the fundamentals of these earnings and dividend declaration will support the ongoing positive sentiment in the market. Also, we note that some high and low-priced stocks have this month as their qualification and mark down dates, a situation that will keep the market oscillating, while at the same supporting recovery. During the week, the share prices of Fidson Healthcare, Presco, and Conoil were adjusted for dividends recommended by their board of directors.
Traders and investors who understand the importance of combining fundaments and technical analysis in making investment decisions in the stock market should take this opportunity to position in some sectors for medium and short-term gains. They include the banking, telecom, industrial, agribusiness, real estate, construction, and consumer goods sectors, after a careful study of economic recovery and sectors that had supported the weak recovery which is likely to influence the performance of the companies in that industry and the market.
Movement Of NSEASI
NGX action index had a mixed performance last week with three sessions of upmarket and two trading days of losses, thereby short-living the bull transition of the previous week, as high-priced stocks like Airtel Africa and others suffered losses. This depressed the market and changed the trend on a daily time frame.
Trading opened the week on a positive note Monday when the index gained 0.04%, a situation that was sustained on Tuesday and midweek as the NGX index closed 0.52% and 0.22% higher respectively. The index, however, pulled back on Thursday and Friday when the index shed 0.08% and, then 1.24% respectively, which was enough to wipe out the gains recorded earlier in the week. These brought total loss for the period to 0.57%, as against the previous week’s 1.47% gain.
Consequently, the key performance NGX index lost 217.82 basis points, closing at 37,994.19bps from after opening at 38,212.01bps, touching an intra-week low of 37,980.21bps from its highs of 38,501.31bps on selloffs in high cap and profit booking among the blue-chip stocks. Also, NGX market capitalization dropped by N12.74bn to N19.8tr, compared to the previous week’s N19.92tr, which also represented a 0.62% depreciation in value.
The weekly advancers’ table was dominated by low cap stocks, in the midst of selloffs for portfolio repositioning and balancing ahead of earnings expectations as investors continue to study trend and the changing environment. Price actions reveal the presence of sellers in the market, a situation that did not impact negatively on the sectorial indexes, four of which closed higher, while the consumer goods index was marginally down.
Also, during the week, UACN Property Development Company, officially changed its name to UPDC Plc with the trading symbol of UPDC, following the acquisition of a majority 51% stake by Custodian Investment Plc.
The seeming negative outing for the week did not reflect on market breadth, as gainers outnumbered losers in the ratio of 44:22 on 97% selling volume and 3% buy position, just as Money Flow Index looked down, reading 52.46bps from the previous week’s 52.84 points. This is an indication that funds exited equity space on profit-taking.
NGXASI WEEKLY CHART MOVEMENT
NGX index action has formed a rectangle chart pattern of consolidation on a weekly time frame, with candlestick formation yet to confirm direction at the end of the period under review, after forming a double bottom that supports a continuation of trend and reversal, ahead of Q2 financials. Already the daily chart has confirmed a change in trend, following which all eyes are on Monday’s trading.
Bullish Sectoral Indices
Performance indexes across the sectors were bullish, except for NGX Consumer goods that closed lower by 0.12%, while NGX Oil/Gas led the advancers after recording 6.35% higher, followed by Banking, Industrial goods, and Insurance indexes with 3.29%, 0.19%, and 0.17% respectively up,
Activates in volume and value terms were mixed as investors exchanged 1.35bn shares worth N12.14bn, compared to the previous week’s 1.02bn units valued at N14.15bn, with volume driven by trades in Financial Services, ICT industry, and Conglomerates particularly Fidelity Bank, FBNH, Zenith Bank, Chams, and Transcorp.
UPDC Plc and Cutix were the best-performing stocks for the week after gaining 40% and 21% respectively, closing at N1.21 and N3.63 per share on market forces and full-year earnings expectations. On the other hand, Redstar Express and Eterna lost 15.26% and 14.80% respectively, at N3.11and N6.39 per share, on profit-taking.
Market Outlook
We expect a mixed performance on more earnings expectation and profit-taking, as bargain hunting and accumulation of dividend-paying stocks to realign their portfolio, with all eyes on the June consumer price index in the week ahead of the MPC meeting, just as fixed income market yields are slowing down due to bearish trend in the market.
Any breakout at this point offers new entry opportunities for traders and investors to reposition in value-laden underpriced growth stocks, while the just-concluded March year-end accounts audited full-year numbers submission has supported the recovery. This is based on the fact that 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 a 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.
Meanwhile, the home study packs on Comprehensive Stock Market trading course video, INVEST 2021 New Opportunities & New Paths To Profits Summit materials and 10 Golden Stocks for 2021, Strategies and How to invest profitably in this Changing Market Dynamics/ Recession, Mastering Earnings Season For Profitable Investing and Trading in any market situation/ cycles, Life Beyond COVID 19 Investment Opportunities In The Stock Market are now available. To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085 and 08179547605 now.
Comments
Post a Comment