Bearish Sentiments Yet, As Bank Recapitalisation Gathers Steam, Investors Position On Pullbacks

Market Update for April 18

Corrections and pullbacks on the Nigerian Exchange continued on Thursday, as the composite NGX All-Share index trades below the 100,000 psychological line after breaking down a major strong support level of 100,869.20 in the midst renewed position taking and mixed sentiment to short-live the previous session marginal gain. Dividend expectations and qualification dates continue to guide investors trading and investing decision, ahead of 2024Q1 earnings reports.

The changing market fundamentals at this season and phase of the market call for a rethink of trading and investing strategies to stay ahead of the game, in the face of   higher interest rates and yields in alternative investment windows in the face of mixed economic data and ongoing reform policies of the government. Also, market players continue to digest recent macroeconomic reports and unfolding activities in the exchange market with regard to how it impacts productivity level on the nation economy going forward and attraction of foreign inflow.

Market players continue to digest and study the mixed corporate earnings and macroeconomic data that reveal the state of the economy and impact of the ongoing government policies. All eyes are on the nation’s Q1 GDP which will give more insight as to where the economy is headed. This is notwithstanding the relative stability that has returned to the foreign exchange market in the face of rising inflation, increasing foreign inflow and Naira appreciation due to CBN releasing dollar to BDC as intervention and clearing FX backlog.

The NGX index’s action continued to trade below the T line and 50 day moving average to confirmed weak momentum and extending decline phase, as the index witnessed slight up market on a low traded volume and negative market breadth to stay below the  8 day moving average exponential and  50 DMA to confirm continuation or reversal  of trend depending on market forces and state of Q1 earnings reports of listed companies, just as market players also look at corporate actions to position for dividend income. Although, we see fiscal and monetary policies trying to return the nation’s economy to the path of recovery, even with the continued mismatch of policies and implementation style. As declining oil production in the last months is a minus to the nation reserve.

The notifications for company AGMs, as well as closed period and board meeting to approve unaudited Q1 2024 reports continue on the exchange. The latest came from International  Breweries, Nestle Nigeria and ABC Transport, while Airtel Africa update the market of its share buyback and ETI on repayment of its $500 million Eurobond.  Just as The Initiates notified the market of insider dealing.  Therefore, investors should 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 still weak on a selling sentiment as revealed by candlesticks formation and momentum indicators. This indicate weakness in the market, as ADX inching up at 32.25, while RSI and Money Flow Index are down to read 34.86 and 26.81 points against the previous session 35.13 and 32.62 points respectively.  Market players should watch this current trend and trade with caution after the index had confirmed markdown phase and correction since the first trading session in Q2. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and selloffs in the face of others investment windows returns remain below inflation at 33.2% as Naira continues to look up in recent days.

To navigate the rest of the quarter and beyond profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Monday, Wednesday and Friday trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent range market. Despite the oscillating volume of transaction witnessed in recent time, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.

Oil price rebounded on Thursday to continue its oscillation, as it trades at $88.12 per barrel in the midst of escalating Middle East conflict and supply fear after Isreal carried out attack on Iran. As China economic momentum weaken in the face of US Fed hawkish outlook to checkmate inflation. Even as rising geopolitical tension across the globe remained a major threat to many economies and the commodity market and other factors that impact oil price as it continued to rally. This trend may likely continue in 2024, this up and down movement that drive volatility. As middle East conflict and war in Ukraine last.

Meanwhile,  Thursday’s trading started  in the green  but pulled back and oscillated throughout the session on profit taking and buying interest in some major  sectors  a situation that pushed the NGX’s index to an intraday low of 99,792.21bps from its  highs of  100,073.29bps, before closing slightly below its opening figure at 99,845.91bps.

Market technicals for the session were mixed and weak, as volume was lower compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 19% buy position and 91% sell volume. The total transaction volume index stood at 0.63 points, just as impetus behind the day’s performance was weak as Money Flow Index  slide to read 26.81pts, from the previous day’s 32.62pts, indicating that funds left the market.

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Index and Market Caps

At the end of Thursday, the key performance  NGX All-Share Index slide by  62.98bps, closing at 99,845.91bps after opening at 99,909.54bps, representing a 0.06% drop, just as market capitalization fell by N35.50bn, closing at N56.47r from the previous day’s N56.50tr, which also represented a 0.06%  value loss.

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Thursday’s downturn was driven by profit taking in the shares of GTCO, UBA, Ucap, Oando, Accesscorp , FBNH and CWG among others. This impacted mildly on Year-To-Date gain which inched up to 33.53%. Market capitalization YTD gain stood at N13.05trillion, representing 39.14% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed with the NGX Consumer goods and Insurance closed higher by 0.14% and 0.03% respectively, while, NGX Banking was down with 0.63%, while NGX Energy and Industrial goods finished flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 18:16, while transactions in volume and value were down after investors exchanged 285.91m shares worth N5.54bn. Volume was driven by trades in  Accesscorp, GTCO, UBA, Transcorp and  Zenith Bank.

Guinness and Neimeth were the best performing stocks, gaining 10% and 9.76% closing at N55.00 and N1.80 per share respectively on market forces and sentiment. On the flip side, Ucap and Conhall Plc lost 9.73% and 9.70%, closing at N18.10 and N6.45 per share, purely on profit taking.

Market Outlook

We expect mixed and bearish sentiments to continue in the face of plans for bank recapitalisation as more corporate earnings flow in, along with dividend announcements. Investors continue taking advantage of pullbacks to position to rebalance their portfolio.

This is amid the volatility and pullbacks that add more strength to upside potential. As such, 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