Market Update for the Week Ended July 19 and Outlook for July 22-26
Bulls resurfaced on the Nigerian Exchange (NGX) last week, after two weeks of negative outings on renewed buying interests in blue-chips and highly capitalised stocks which impacted positively on the composite NGX All-Share index as it closed higher.
Last week’s rebound was despite the ongoing primary activities by Nigerian banks, and the series of weak macroeconomic data, including the Consumer Price Index showing inflation at 34.19% in June. There are also the mismatch of economic policies by the government that continues to show an unclear model and, indeed, an agenda to revamp the already contracting economy as revealed by the high interest rate regime, sustained inflationary pressure, high exchange rate and low national output.
Nigeria’s economy has not breathed out for over three years of interest rate hikes and multiple taxes on businesses which has contributed to the high unemployment rate today, besides the insecurity in the system that refuses to go away. During the week, United Capital released its half-year earnings reports with impressive numbers especially the top and bottom lines that surged by 38% and 65% respectively to N15.15bn and N7.74bn. The directors have recommended a bonus of two new shares for one held, in addition to cash dividend of 90 kobo.
This earnings news supported the market in the face of negative sectorial performance indexes, as all eyes are on outcome of CBN policy meeting this week. Even as the government is set to heatup the system with the taxing of banks fx gain in 2023 financial year after company and withholding tax had been paid for same period, coupled with another CBN directive that the banks should move funds in dormant bank accounts special account. All these are happening at the point the International Monetary Fund (IMF) downgraded Nigeria’s economic growth projection to 3.1% from the 3.3% earlier predicated. IMF blamed this on the weakening economy and gloomy operating environment.
The expected earnings reporting season is likely to change the current momentum and direction of the market as more companies release their scorecards and beat expectation, with the increased number of companies likely to declare interim dividend. The level of liquidity and outcome of the upcoming policy meeting of CBN will determine how far prices will go. Despite the rising economic headwinds being witnessed today, amid the ongoing economic reforms of the government and challenges in exchange market as investors confidence are threaten with unfolding policies of economic managers.
Technically, the market is still consolidating on a weekly chart waiting a trigger to move up or down, while the rebound for the period under review signaled revesal that needs confirmation as trading opens this week with all eyes on MPC meeting outcome. Sentiment report for the period revealed buying sentiment, as monry flow index inched up to read 60.59 points on a weekly chart. Trading above the T line on a daily and weekly time frame to reflect improving momentum. Positive market breadth for the period occurred in the midst of position taking and sector rotation. As bargain hunters took advantage of pullbacks to buy into fundamentally sound companies with high yield, strong earnings power and low valuation.
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Oil price during week oscillated to recorded another weekly loss for two weeks, as it trades at $82.63per barrel following struggling China economy, US election in the midst of attack on Yemen oil port by Israeli. This rising geopolitical tensions threats supply, coupled with ongoing war in Ukraine and Russia disrupting oil output in the face of osculating price and OPEC supply cut to manage price. The up and down movement of oil price has continues to drive volatility across different investment windows and inflation again.
Movement Of NGXASI
It was a bullish week on the NGX as the benchmark index NGXASI recorded four sessions of positive outing and a day of down market to close above the 100,000 pyscholigical line on a very high traded volume and positive market internals in the face of buying interest for the period. The price adjustment of 4 insurance companies for dividends which Linkage Assurance, Sunu Assurance, Conrnerstone Insurance and Mansard weighed on the sector index to close lower for the week.
The week’s trading started on a positive note, extending the previous week’s gain as the index closed 0.30% higher on Monday, a trend that was sustained on Tuesday when the market inched up with 0.11%, but pulled back by the midweek on profit taking and selloffs as the benchmark index slide by 0.04% signaling a top chart pattern that was reversed on Thursday after gaining 0.47% on bargain hunting and buying interest in blue chip companies in the midst positive corporate from Ucap and Oando court case news. This momentum was sustained on Friday as the index slow dowm to record gain of 0.04%. This brought the week’s total gain to 0.87%, against 0.35% loss in the previous week.
Consequently, the key performance NGX All-Share Index gained 868.12bps, closing at 100,539.40bps, from previous week’s 99,671.28bps closing level, after touching an intra-week high of 100,612.90bps from a lows of 99,671.28bps. Market capitalisation also rose by N488bn to N56.93tr, representing a 0.86% appreciation in value.
Top advancers’ table for the week was dominated by medium and low priced stocks in the midst of buying interest and low valuation ahead more earnings hitting the market. Also notable was the fact that market players are still trading with caution, even when taking position and carrying out sector rotation.
Market technicals for the period were positive and strong as revealed by volume and market breadth, with advancers outnumbering decliners in the ratio of 37:34 on a buying sentiment as indicated by investdata sentiment report showing 92% ‘buy’ volume and 8% sell position. Money Flow Index was looking up at 60.59 points from the previous week’s 54.37 points, an indication that funds entered the market on a weekly time frame.
Technical View
The NGX index’s action consolidated to form a sysmmetrical trigale chart pattern that signaled continuation of trend or reversal, which needs to be confirmed in the new week, as more half year financial reports flow into the market in the face of changing momentum and sentiment, especially from the financial service providers and oil companies. The position taking for the period in the face of low valuation and mixed macro-economic data, even when higher yields in the alternative market still remain below inflation rate.
Already, the index has entered the accumulation phase on a weekly chart. We note that 98,893.55 and 97,612.51bps are strong support levels on the daily and weekly time frame, even as the index on the weekly time frame is on range bound. The market is at a critical zone as all eyes are on the more financials to support market fundamentals and attract inflow again. Also, we note that investors are taking long-term positions in the face of dividend expectations and volatility.
We also note that buyers are in control, as revealed by the buying sentiment and positive market breadth, as the index is trading above the T line and above 50-Day Moving Average on the weekly chart.
Bearish Sectoral Indices
The sectoral indexes of the week were in red, except for the NGX Industrial Goods that closed 0.08% higher, while NGX Insurance led the decliners after losing 4.86%, followed by Consumer Goods, Energy and Banking with 0.20%, 0.10% and 0.05% respectively.
Transactions in volume and value were mixed, as players exchanged 2.83bn shares worth N42.37bn, compared to previous week’s 2.77bn units valued at N85.23bn. Volume was driven by Financial Services, industrial goods and Oil/Gas industry, boosted specifically by Jaiz Bank, Cutix, FCMB, Zenith Bank and Fidelity Bank.
United Capital and Africa Prudential were the best performing stocks during the week, gaining 42.78 and 33.78% respectively, closing at N40.55 and N9.90 per share on dividend news and sentiment. On the flip side, Linkage Assurance and Veritas Kapital lost 24.56% and 11.67% respectively, at N0.86 and N1.06 per share, on selloffs.
Outlook for the week
We expect the mixed sentiment as players react to expected outcome of policy meeting and unfolding policies direction of fiscal authority. Also, as more earnings reports hit the market in the face of portfolio rebalancing. Also, bargain hunters are taking advantage of pullbacks to buy into value stocks. As investors are watching with rapt attention.
However, retracement to the 97,000bps level and below is possible on correction as global and domestic events unfold.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08179547605
