Market Update for July 22

Monday’s trading on the Nigerian Exchange started the week on a positive outing, extending the previous session’s gain for a third consecutive day on a low traded volume and positive market breadth in the midst buying sentiment as investors bet on the outcome of the policy meeting of Central Bank of Nigeria which started also on Monday. Even so, all eyes are still on more corporate earnings in the face of weak macroeconomic data, a reflecting the mismatch of economic policies.

During the session, UPDC, one of the companies in the construction and real estate sector of the market provided its six-month scorecard indicating that the company is back to profit. Top and bottom lines grew by 21% and 105% respectively to N2.6bn and N10.9m for the period.

The benchmark NGX All-Share index closed slightly higher to form a double top chart pattern that support reversal or continuation of trend depending on market forces as trading opens on Tuesday. However, the ongoing earnings reporting season is likely to support the market fundamentals in the midst of banking sector primary market activities that had dominated the market at the time consumers and investors confidence are slowing down as private sector businesses are closing down in the face economic challenges and overregulation. It is important that market players should not ignore market shift at their own risk, since the half-year earnings reports will give insight of economic situation for the period.

Position taking continued in some major sectors of the market, a situation that kept index action above the T-Line, supporting the uptrend.  As the market continues to trade within the value area, creating entry opportunities for discerning investors and smart traders, even as trading volume pattern and resistance level signal sell zone ahead of more half-year earnings and dividend announcement. This new uptrend could be sustained if the expected company numbers beats market expectation.

The NGX index’s action remains above the T-line and the two moving averages of 50-EMA and 50-SMA indicating strength in the midst of changing market fundamentals and technicals. We note that the economic reforms of the  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 below $84 per barrel at the international market.

On Monday, Flour Mill Nigeria, Cornerstone Insurance and Honeywell Flour Mills notified the NGX of their forthcoming board meetings, while Airtel Africa continues to update the market of its ongoing share buyback programme, while United Capital informed the market of insider dealing in its shares. 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 still in the uptrend on a mixed momentum as revealed by the candlestick formation and momentum indicators. As ADX is looking up at 20.29, while RSI and Money Flow Index were mixed to read 64.08 and 52.91 points against the previous session 63.69 and 53.09 points respectively. Market players should watch this current trend and trade wisely in the face of funds entering the market slowing down, despite 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 half year numbers.

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Oil prices on Monday was down, continuing its oscillation, as it trades at $82.34 per barrel in the midst of the U.S election uncertainty and weak China’s economic data, despite cutting rates to boost economic activities. As increasing geopolitical tension across many economies threaten economic activities in the face of cooling inflation that, none-the-less points to the possibility of rate cuts. This trend may likely continue for the rest of 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 opened in the upside and was sustained throughout the session, despite oscillating on profit taking in some sectors, while buying interest in banking stocks and others. This situation pushed the NGX’s index to an intra-day high of 100,586.40bps from its lows of 100,506.80bps, before closing marginally above its opening level at 100,568.6bps.

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 78% buy position and 22% sell volume. The total transaction volume index stood at 0.58 points, just as energy behind the day’s performance was relatively strong as Money Flow Index was flat to read 52.91pts, from the previous day’s 53.09pts, indicating that funds slowdown the market.

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Index and Market Caps

The NGXASI, at the end of Monday trading inched up by 29.20 basis points, closing at 100,568.60bps after opening at 100,539.40bps, representing a 0.03% up. Market capitalization rose by N16.54bn, closing at N56.95tr from the previous day’s N56.93tr, which also represented a 0.03% value gain.

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The upturn was driven by buying interests in Zenith Bank, UBA, ETI, Julius Berger, Livestock Feeds and Neimeth Pharm among others, which impacted mildly on Year-To-Date growth as it inched up to 34.50%. Market capitalization YTD gain grew to N12.82tr, representing 39.13% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were down, save for NGX Banking index that closed higher by 0.45%, while NGX Consumer goods index led the decliners after losing 0.11%, followed by  Insurance and Energy  with 0.10% and 0.01% respectively. Just as NGX Industrial goods finished flat.

Breadth was positive as gainers outnumbered losers in the ratio of 23:15, while transactions in volume and value were down after investors exchanged 335,70m shares worth N3.72bn. Volume was driven by trades in Ellah Lakes, Universal Insurance, Ucap, Veritas Kapital and FCMB.

Trantalizer and Livestock Feeds were the best performing stocks, gaining 8.89% and 8.18% respectively, closing at N0.49 and N2.38 per share respectively on the back of market forces and sentiment respectively. On the flip side, Caverton  and Royal Exchange  lost 9.68% and 6.94% respectively, closing at N1.40 and N0.67 per share, purely on profit taking.

Market Outlook

We expect mixed sentiments on policy meeting outcome today and interim dividend expectation on persisting low valuation. Portfolios repositioning is however continuing, as investors take 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