Profit-Taking, Correction, Ahead Of H1 Earnings, But Let Your Investment Goals Guide You
Market Update for July 7, 2021
Nigeria’s equity market indexes moved higher Wednesday, as investors await the onset of the half-year earnings reporting season which kicks off any moment from now, with investors expecting improved numbers from the banking sector and others, a situation likely to support those that are relatively undervalued or mispriced. This is because it is one of the most active sectors on the Nigerian Exchange, based on historic data that reveals its consistency in dividend payment.
The recovery in the global and domestic economy driven by vaccination and recovery oil price in the international market are expected to impact many sectors of the economy, including banking, coupled with the changing dynamics in the money and fixed income market since the beginning of the year.
The money flow index shows funds entering the market consistently for a straight seventh trading session on improving volume that indicates telltale signs of smart money markup ahead of Q2 corporate earnings and action. This is also not unexpected, given that Nigerian pension funds managers have divested from foreign money market instruments, besides the high probability of yields slowing down in this second half.
Investors and traders should not be carried away with this rebound but should be guided by their investment objective and take profit immediately after their reasonable profit targets are met (15-20%). Also, their stop-loss mode should be activated. To navigate the month profitably, order for Investdata video title: Stock Market Analysis Beyond Fundamentals and Technical Analysis to enhance trading decisions and boost your bottom line. Also, to up your game in stock trading and investing, check out the video materials below.
Repositioning in the sectors with strong potential to grow in the midst of stagflation and weak economic recovery, is the way to go, targeting individual stocks with sound fundamentals and positive base charts and patterns, many of which have recently broken out their resistance levels on high traded volume to tell you where they are heading. Knowing that the earnings reporting season comes with different momentum, activities level, and inflow, at this point, we will refer you to our video, “How to profitably trade or invest with earnings season in any market situation”
Meanwhile, Midweek’s trading opened on the upside and oscillated to sustain the positive trend on a high traded volume to breakout 38,454.65 basis points, on increased buying interests in blue-chip dividend-paying stocks and low priced equities that pushed the benchmark index to an intraday high of 38,501.31basis points from its lows of 38,403.30bps.
Wednesday’s market technicals were positive and strong, with volume traded higher than the previous day’s, in the midst of positive breadth and high buying pressure as revealed by Investdata’s Sentiments Report showing 100% ‘buy’ volume. The total transaction volume index stood at 1.33 points, just as momentum behind the day’s performance was relatively strong, as seen in the 60.65pts Money Flow Index, compared to the previous day’s 58.85pts, indicating that funds entered the market.
Index and Market Caps
The composite NGX All-Share Index, at the end of trading, gained 83.27 basis points, closing at 38,501.31bps, from an opening level of 38,418.04bps, representing a 0.22% up, just as market capitalization rose by N43.41bn, closing at N20.07tr, from its opening value of N20.03tr, representing a 0.22% value gain. Also notable is the fact that many indicators confirm a bullish trend on a daily time frame, just as the index is expected to break out these resistance levels of 38,678.49 and 38,831.20bps to confirm a strong recovery move.
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Midweek’s upturn was due to price appreciation in stocks like GTCO, GSK, UACN Property, Cutix, Flour Mills, Vitafoam, Access Bank, Custodian Invest, UBA, Zenith Bank, Lafarge Africa, Fidson Healthcare, Fidelity Bank, and Oando, among others. This impacted positively on Year-To-Date loss, cutting it to 4.39%, while the drop in market capitalization YTD fell to N998.01bn, representing a 4.67% drop from its opening value for the year.
BullishSector Indices
All the sectorial indexes for the session closed higher, as NGX Insurance led the advancers after gaining 0.61%, followed by Banking, Energy, Consumer, and Industrial goods with 0.53%, 0.35%,0.14%, and 0.10% higher respectively.
Market breadth remained positive as advancers outnumbered decliners in the ratio of 22:13, while transactions in volume and value terms were up after stockbrokers had traded 296.1m shares worth N2.56bn. Volume was driven by trades in FBNH, Access Bank, Zenith Bank, Fidelity Bank, and Transcorp.
Cutix and John Holt were the best-performing stocks after gaining 10% and 9.84%, closing at N3.65 and N0.67 per share respectively on earnings expectations and market forces. On the flipside, BOC Gases and Berger lost 9.94% and 9.64% respectively, closing at N7.70 and N8.90per share, on profit booking.
Market Outlook
We expect a mixed trend, on profit-taking and repositioning for half-year earnings reporting season kicking off any time soon after forming a wave that supports an uptrend as bargain hunters take advantage of pullbacks to reposition ahead of Q2 numbers. It is noteworthy that oil price continues its recovery at the international market, even as corporate actions and interim dividend possibilities around the corner.
We note also that some stocks are trading within their buy ranges to become more attractive at this point for income investors and traders, even as the market anticipates positive news, while oil price continues to oscillate above $73pb to support global economic and stock market recovery across climates. We also expect the ongoing COVID-19 vaccination to support a global and domestic economic recovery that will enhance 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 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.
We appreciate all participants and speakers for making the Investdata Q3 master class a success.
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