Market Update for July 15

Trading activities on the Nigerian Exchange opened the week on a positive note, as buying interests in blue-chips and highly priced stocks weighed on the benchmark NGX All-Share index which closed higher. This extended the bull transition for the second successive session in the midst of low traded volume and positive market internals.

The buying sentiments witnessed at the end of Monday were an apparent reaction to the June inflation rate at 34.19%, up from 33.95% in the previous month according to Nigeria’s National Bureau of Statistics (NBS). Food inflation remained the major culprit once more, jumping to another all-time high of 40.87% owing to the persisting insecurity across the nation, especially in the farming communities.  Also there was a rise  in the prices of other goods and services in the month under review as the economy continues to suffer from the impact of last year’s removal of subsidy on petrol that sent transport cost skywards, made worse by the massive devaluation of the Naira. All eyes are on more corporate earnings reports to give impetus to the market ahead of the next policy meeting where committee members would likely vote for a further 25 to 50 basis points hike in the upcoming meeting thereby maintaining the committee’s hawkish stance at the detriment of the economy.

The market rebound and markup have created entry opportunities for players, with the trading volume pattern and money flow index signaling an uptrend that needs confirmation as buying sentiment increased at this demand zone in expectation of earnings and slowing inflation on month on month basis. This new uptrend could be sustained on the state of expected scorecards and momentum that comes with earnings reporting season.

Champion Breweries joined the early filers on Monday after releasing its half-year earnings report for the period ended June 30 with mixed numbers. Top line rose by 67%, despite which it slipped into a 1,430% loss. Outlook for the rest of the year remains mixed on the back of the ongoing primary market activities for companies and monetary policy direction for the rest of the year.

The NGX index’s action has crossed the T-line to trade above it, while the two moving averages of 50-EMA and 50-SMA in the midst of changing market fundamentals and technicals are heading back to the 100,000 psychological line again. This is an indication that relative strength is returning to the market after the weakness.

We note that the economic reforms of the Bola Tinubu Government, measured by the outpouring of fiscal and monetary policies, are yet to put the nation’s economy on the path of recovery, due to the continued mismatch of these and previous ones. There are also issues with the implementation style in the face of oscillating oil production output even as the Naira continues to depreciate at a time that oil is selling above $84 per barrel at the international market.

On the first trading of the week, Airtel Africa, Lasaco Assurance, Japaul Gold, Omatek and Neimeth Pharm, notified the market of their closed period and board meetings, just as more companies informed  the NGX of their forthcoming Annual General Meetings. Similarly, some others presented resolutions at such meetings with the latest coming from Fidelity Bank, while GTCO opened its offering opens. Airtel Africa continued to update the market of its ongoing share buyback, while Infinity Trust Mortgage Bank announced the exit of its CEO and appointment of new Managing Director in acting capacity. In the midst of all these, it is safe for investors to target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings which price feeds on in any market cycle.

Technically, the NGX is witnessing the return of positive momentum as revealed by the candlestick formation and mixed momentum indicators. As ADX was down at 17.22, while RSI and Money Flow Index were up to read 55.83 and 46.78 points against the previous session 50.94 and 41.29 points respectively. Market players should watch this current trend and trade wisely in the face of funds entering the market on position taking. Also, trading volume pattern continued to oscillates, suggesting buying interest and profit taking in some sectors in the midst of wait and see attitude ahead of more Q2 corporate numbers.

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Oil price on Monday pulled back to continue its oscillation, as it trades at $85.05 per barrel in the midst of stronger dollar and fear of demand, As China weak macroeconomic data and trade war with the west remain a concern for market players across the globe. As increasing geopolitical tension across many economies threats economic activities in the face of cooling inflation pointers to rate cuts . This trend may likely continue in 2024, while the up and down movement continues to drive volatility, even as ceases fire discussion is ongoing to resolve the Middle East conflict, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Meanwhile, Monday’s trading started in the upside and it was sustained throughout the session, despite oscillating on buying interest in financial services stocks and others in the midst of profit taking in some sectors. This situation pushed the NGX’s index to an intra-day high of 99,981.58bps from its lows of 99,671.28bps, before closing above its opening level at 99,971.64bps.

Market technicals for the session were positive and mixed with lower volume when compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 97% buy position and 3% sell volume. The total transaction volume index stood at 0.67 points, just as energy behind the day’s performance was relatively strong as Money Flow Index inched up to read 46.78pts, from the previous day’s 41.29pts, indicating that funds entered the market.

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Index and Market Caps

At the end of the session, the composite NGXASI gained 300.36 basis points, closing at 99,971.64bps after opening at 99,671.28bps, representing a 0.30% growth. Market capitalization rose by N167.10bn, closing at N56.61tr from the previous day’s N56.44tr, which also represented a 0.30% value gain.

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The upturn was driven by accumulation in the shares of Presco, MTNN, Zenith Bank, Transcorp, Accesscorp, Cutix, Ikeja Hotel, Redstar, Champion Breweries and Omatek among others.  This impacted positively on Year-To-Date growth as it inched up to 33.34%, while Market capitalization YTD gain fell to N11.94tr, representing 38.25% above its opening level for the year. 

Mixed Sector Indices

The sectoral performance indexes were mixed, save for the NGX Banking  and Insurance  index that closed higher by 1.32% and 0.08% respectively, while the NGX Consumer goods  index led the decliners after losing 0.05%, followed by Energy  and Industrial goods  with 0.04% and 0.02% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 29:15, while activities in volume and value were mixed after players exchanged 362.43 million shares worth N7.37bn. Volume was driven by trades in GTCO, Accesscorp, FCMB, Japaul Gold and UACN.

Cutix and Ikeja Hotel were the best performing stocks, gaining 9.96% and 9.45% respectively, closing at N5.08 and N6.95 per share respectively on dividend reward and sentiment. On the flip side, Abbey Building and Jaiz Bank lost 7.04% and 5.78% respectively, closing at N2.51 and N2.13 per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments and bargain hunting as players digest the CPI data in the midst expected earnings and outcome of MPC meeting next week, as portfolios repositioning continue, while taking advantage of pullbacks to buy into value.

This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

08028164085