Mixed Trend, As Investors Position On Market Corrections, Stocks Enter ‘Buy’ Range

Market Update September 2

The nation’s stock market on Thursday was a mixed and volatile session with the benchmark index closing higher to halt the previous three consecutive days of decline on a very high traded volume but on negative market breadth.

The rekindle buying interest in banking stocks after Access Bank released its impressive half-year audited scorecard to the market, in addition to the price appreciation in Dangote Cement which pushed the NGX index up, despite the selling pressure as revealed by the day’s investor sentiment report at the close of trading. We expect that the fund recently disbursed by the Central Bank of Nigeria to SMEs in the country will trickle down to the market and boost these small-scale businesses and further boost the ongoing economic recovery.

Despite the seeming selling sentiment or pressure on Thursday, trading momentum improved slightly as technical indicators turned up, especially RSI and money flow index. Also, we note that the NGX index action formed an inverted hammer candlestick pattern that signals reversal which requires confirmation today as trading opens.

Regardless of the mixed outlook for September, it remains a very positive month on the exchange with strong buying positions and positive sentiments over the years. Historical data reveals that over the last 10 years, the month has closed positive seven times and negative in three- 2011, 2017, and 2018, being the end of the quarter that ushers in Q4 and the Q3 earnings season. Given the changing market dynamics and trading environment, we look forward to a mixed September as the factors that kept the market on its oscillating trend are still there, given the state of the economy, corporate earnings performance, and other factors would be game-changers as we go into the new month.

Meanwhile, Thursday’s trading opened slightly on the downside and rebounded in the mid-morning to the afternoon as it oscillated on renewed positioning in the financial and industrial sectors amidst profit-taking, a situation which pushed the key performance index to an intraday high of 39,485.65 basis points, from its low of 39,181.18bps. Thereafter, it closed above the opening figure at 39,252.19bps.

Market technicals were positive and mixed as volume traded was higher than that of the previous day in the midst of breadth favouring the bears on a selling pressure as revealed by Investdata’s Sentiment Report showing 23% ‘buy’ volume and 77% sell position. Total transaction volume index stood at 1.12 points, just as the impetus behind the day’s performance was relatively weak, with Money Flow Index reading 46.28points, up from the previous day’s 44.98 points, an indication that funds entered the market.

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Index and Market Caps

The composite NGX All-Share Index, at the end of Thursday’s trading, gained 68.01bps, closing at 39,252.19bps, from its opening level of 39,184.22bps, representing a 0.17% marginal rise, just as market capitalization rose by N35.44bn, closing at N20.45tr, from the opening value of N20.42tr, also represented 0.17% appreciation in value.

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The day’s upturn was driven by demand for Dangote Cement, GTCO, Zenith Bank, FBNH, Access Bank, UBA, Julius Berger, Livestock Feeds, and Chams, among others. These impacted mildly on Year-To-Date loss, which reduced to 2.53%, just as the loss in market capitalization YTD stood at N606.48bn, representing a 2.77% decline from the year’s opening value.

Mixed Sector Indices

Performance indexes across the sectors were mixed, except for the NGX Oil/Gas and Consumer Goods that closed 1.22% and 0.06% lower respectively, while the NGX Insurance Index led the advancers, after gaining 1.07%, followed by Industrial goods and Banking with 0.44% and 0.19% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 18:16, while transactions in volume and value terms were up after stockbrokers traded 262.14m shares worth N2bn, compared to the previous day’s 169.3 million units valued at N1.42bn. The day’s volume was driven by trades in Access Bank, Transcorp, Honeywell Flour Mills, Mutual Benefits Assurance, and Sovereign Trust Insurance.

Chams and Prestige Assurance were the best-performing, gaining 4.76% and 4.35%, closing at N0.22 and N0.48 per share respectively on low price attraction and market forces. On the flip side, Unity Bank and Oando lost 8.62% and 7.03% respectively, closing at N0.53 and N4.10 per share, purely on selloffs and profit-taking.

Market Outlook

We expect a mixed trend as market players take advantage of the correction to position as many stocks enter their buy range to attract funds into the equity space, just as institutional investors and others digest the Q2 GDP growth ahead of more first-tier banks results, as well as the continued repositioning of portfolios for the year last quarter. Also, investors are still observing the interplay of forces in the FX market as the CBN gives a guideline for the new 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.

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https://investdata.com.ng/mixed-trend-as-investors-position-on-market-corrections-stocks-enter-buy-range/