Market Update for September 21
By Investdata Analysts
The nation’s stock market, on Monday, maintained a mixed and ranging outlook remaining dicey as its technicals and fundamentals seem totally disconnected, extending into the second successive sessions of marginal gains on a low traded volume. The market is in need of positive information or policy statement to trigger buying interests ahead of the Q3 earnings reporting season, at a time of so much negative macroeconomic indices wobbling the nation’s economic fundamentals.
The continued mixed sentiments and volatility will likely be sustained throughout the rest of this year, such that although prices stay high or low, the trend would remain the friend of investors. Following which you must stay alert and cautious, while constantly reviewing your trading strategy, given the rapid change going on in the market, if you must meet your investment objective.
Despite the absence of a positive catalyst, however, the market is likely to benefit from the compelling stock valuations, as investors seek high yield opportunities in the face of negative real returns in the fixed income market.
Meanwhile, Monday’s trading started slightly in the green. This was sustained throughout the session on profit taking and buying interests in MTNN, Guaranty Trust Bank, Presco and UACN, a situation that pushed the NSE All-Share index to an intraday high of 25,592.86bps, from its low of 25,564.366bps, before closing at 25,5574.35bps.
Monday’s market technicals were weak and mixed, with volume marginally higher than the previous session’s in the midst of negative breadth and mixed sentiments as revealed by Investdata’s Sentiment Report showing 35% ‘buy’ volume and sell position of 65%. Total transaction volume index stood at 0.84 points, just as impetus behind the day’s performance remained relatively strong, with Money Flow Index reading 64.26 points, from the previous day’s 63.52 points, an indication that funds enter the market despite profit taking.
Index and Market Caps
The NSEASI closed the day 1.78 basis points better at 25,574.35bps, after opening at 25,572.78bps, representing 0.01% up, just as market capitalization was N1.73bn better, closing at N13.37 trillion, after opening at N13.36tr.
Monday’s marginal upturn impacted mildly on the index, reducing Year-To-Date loss to 4.72%, while market capitalization YTD gain stood at N403.85bn, representing 3.06% above the year’s opening value.
Mixed Sector Indices
The seccoral indexes were mixed, with NSE Banking closing 0.09% down, while the NSE Insurance led the advancers, gaining 1.36%, followed by Industrial and Consumer Goods indexes that gained 0.19% and 0.08% respectively..
Market breadth was negative, with decliners outnumbering advancers in the ratio of 16:6, while transaction in volume and value terms were also mixed, after stockbrokers crossed 196.12m shares, up from the previous day’s 193.5m units. Transaction value however dropped by 6.38% to N1.73bn from precious N1.85bn, boosted by trades in FBNH, Charms, UBA, Mutual Benefits and Zenith Bank.
ABC Transport and Wapic Insurance were the best performing stocks, after gaining 10% and 8.11% respectively, closing at N0.33 and N0.40 per share on market forces. On the flip side, Champion Brewery and Redstar Express lost 10% and 9.20% respectively, closing at N0.81 and N2.96 respectively on market forces and markdown.
We expect pullbacks and repositioning to continue ahead of Q3 corporate earnings and macroeconomic index, given that the August inflation data came worse than expected at 13.22%, thereby deepening the negative returns of many investment windows. Recall that banks have kept the market above its 50-day moving average on a daily time frame, which is equally at overbought zone in the short term.
The mixed intraday movement is likely to persist as the month of September progresses in the midst of profit booking, mismatch of economic policies and negative macroeconomic indices. This is also against the backdrop of the fact that the capital wave in the financial market may persist in the midst of relatively low-interest rates in the money market, high inflation, negative Q2 GDP of 6.1% and unstable economic outlook for the rest of 2020 as government and its economic managers are going front and back with mismatch polices and implementation.
Also, investors and traders are positioning amidst the changing sentiments in the hope of improved liquidity and positive economic indices which may reverse the current trend.
We see investors focusing on portfolio adjustment and rebalancing by targeting companies with strong potentials to grow their Q3 earnings and dividend on the strength of their earnings capacity as the year last quarter is at the corner.
Again, the current undervalue state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation for the rest of the year.