Caution, Sector Rotation, As Investors Window-Dress, Eye Interim Dividend Banks
Market Update for August 24
The seesaw movement continued on the Nigerian Exchange on Tuesday as the benchmark index edged up due to ‘buy’ interests in banking and manufacturing stocks that rebounded on expected earnings from interim dividend-paying banks’ just as oil recoup most of its losses in recent times, considering the approval of vaccines in developed economies.
Tuesday’s buying sentiment halted two previous sessions of bear transition on a low traded volume and a slightly negative breadth in the midst of the somewhat indicators movement. The less-than-average traded volume revealed the absence of large players in the market.
As the month gradually draws to an end and with all eyes on the results of first-tier banks and half-year GDP report from the National Bureau of Statistics (NBS), with the expected impact of the IMF’s $3.35bn SDR allocation to Nigeria which the CBN recently received to boost the nation’s external reserves and increase liquidity in the FX market to enhance foreign transactions. This, with the rebound of oil prices in the international market, can attract more players into the market and economy, but there is a need for the government to properly address the issue of insecurity across the land to support the ongoing economic recovery, which is still weak and fragile.
Meanwhile, the session’s started marginally on the upside before oscillating on position-taking and profit-booking among the medium and low cap stocks which pushed the NGX index to an intraday high of 39,466.71 basis points, from its lows of 39,429.68bps. Thereafter it closed slightly above the opening figures at 39,460.68bps.
Market technicals were weak and mixed as the volume traded was lower than that of the previous day in the midst of negative breadth and buying pressure as revealed by Investdata’s Sentiment Report showing 86% ‘buy’ volume and 14% sell position. Total transaction volume index stood at 0.86 points, just as the momentum behind the day’s performance was relatively strong, with Money Flow Index reading 57.78 points, from the previous day’s 57.87 points, an indication that funds left the market despite the upmarket.
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Index and Market Caps
The leading performance index NGXASI, at the close of Tuesday’s trading, inched up by 25.99bps, closing at 39,460.68bps, from its opening level of 39,434.69bps, representing a 0.08% up, just as market capitalization rose by N13.54bn at N20.56tr, from the opening value of N20.55tr, also representing a 0.08% value gain.
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The session’s upturn was driven by demand in stocks like Zenith Bank, GTCO, Lafarge Africa, Dangote Sugar, Honeywell Flourmill, United Capital, and Livestock, among others. These impacted mildly on Year-To-Date loss, reducing it to 2.01%, just as the loss in market capitalization YTD stood at N497.17bn, representing a 2.36% decline from the year’s opening value.
Mixed Sector Indices
Performance indexes across the sectors were mixed, as the NGX Insurance and Oil/Gas dropped by 0.43% and 0.19% respectively, while the NGX Industrial Goods Index led the advancers, after gaining 0.13%, followed by Banking and Consumer goods with 0.12% and 0.08% respectively.
Market breadth was slightly negative as losers outnumbered gainers in the ratio of 18:17, while activities in volume and value terms were down as stockbrokers traded 196.81m shares worth N1.45bn, compared to the previous day’s 211.33m units valued at N2.02bn. The day’s volume was driven by trades in Courtville Business Solution, Sovereign Trust Insurance, Wema Bank, UBA, and FBN Holding.
Morison Industry and Regency Insurance were the best-performing, gaining 10% and 9.52% respectively and closing at N01.54 and N0.46 per share respectively on market sentiments and forces. On the flip side, FTN Cocoa and Courtville lost 9.09% and 8.82% respectively, closing at N0.40 and N0.31 per share, on profit-taking.
Market Outlook
We expect the mixed trend to continue as month-end draws even closer ahead of first-tier banks results and Q2 GDP data release, as well as the continued repositioning of portfolios ahead of the year last quarter. Also, investors are still observing the interplay of market forces in the FX market as the CBN plans to launch a digital currency platform. The day’s low volume suggests that institutional investors and others are still cautiously looking at the numbers. It is noteworthy that oil prices rebounded in the international market; corporate actions, as well as the interim dividend possibilities, are 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 $68pb to support the global economy and stock market recovery across climates. We also expect the ongoing COVID-19 vaccination to support 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 mixed half-year earnings.
Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021 and beyond, looking the way of mispriced equities ahead of interim dividend announcement and last quarter economic activities. 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 next month.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08179547605
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