Despite NGX Rebound, Mixed Sentiment Remain, As Banks’ Recapitalisation Cast Dark Clouds

Market Update for April 17

Trading activities on the Nigerian Exchange closed green for the first time this month at midweek. halting eight consecutive sessions of bear transition. The benchmark NGX All-Share index inched up on rekindled buying interest in financial services stocks that had recently suffered losses following the midst dividend expectations and qualification dates ahead of 2024Q1 earnings reports expected to give more insight into their current financial direction.

The demand for the shares of FBNH, Fidelity Bank, Accesscorp, FCMB, Cornerstone and others impacted the market positively even as the International Monitory Fund projected that Nigeria’s economy would grow at 3%. This, it said, is on the strength of the ongoing reforms across the fiscal and monetary spaces, just as investors are looking forward to more Q1 numbers and audited reports of the insurance companies. During the trading session, Transcorp Power made available its first quarter scorecard to the market, showing a threedigit growth in top and bottom lines at N67.86bn and N20.14bn. Representing 222.53% and 665.78% rise respectively for the period, translating to Earnings Per Share of N2.69. This was a clear reflection of its high numbers of shares outstanding when compared to its peer Geregu Power that posted EPS of N5.78 within the same period. Geregu is selling at N1,000 per unit, while Transpower’s shares closed at N377 each on Wednesday.

The corrections and pullbacks are part of stock market dynamics that follows bull rally as a reflection of changes in market fundamentals, amid the higher interest rate and yields in alternative investment windows in the face of mixed economic data and ongoing reform policies of the government. Also, market players have continued 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.

As 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.

Despite, the seeming rebound at midweek, 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.  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 AGMs of companies, as well as closed period and board meeting to approve unaudited Q1 2024 reports continue on the exchange. The latest came from Champion Breweries, The Initiates, NGXGroup, Coronation Insurance and ABC Transport, while Airtel Africa informed  the market of filing its audited accounts for the period march 31, 2024 on the 9th of May 2024, even as Transpower updates  the market of  appointment of directors.  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 mixed sentiment as revealed by candlesticks formation and momentum indicators. This indicate weakness in the market, as ADX inching up at 31.59, while RSI and Money Flow Index are mixed to read 35.13 and 32.62 points against the previous session 38.71 and 32.50 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 decline further at midweek to continue its oscillation, as it trades at $87.27 per barrel in the midst of demand concerns outweighing Middle East supply fear as China economic momentum weaken in the face of US inventories rising. 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, trading opened in the downside but rebounded to oscillate for the rest of the session on profit taking and buying interest in financial services stocks, a situation that pushed the NGX’s index to an intraday high of 100,069bps from its  lows of 99,753.50bps, before closing marginally above its opening figure at 99.909.45bps.

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 mixed sentiment as revealed by Investdata’s Sentiments Report showing 49% buy position and 51% sell volume. The total transaction volume index stood at 0.70 points, just as impetus behind the day’s performance was weak as Money Flow Index inched up to read 32.62pts, from the previous day’s 32.50pts, indicating that funds entered the market.  

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Index and Market Caps

The NGX All-Share Index at the end of trading inched up by  101.20bps, closing at 99,909.54bps after opening at 99,808,30bps, representing a 0.10% up, just as market capitalization rose by N20.45bn, closing at N56.50r from the previous day’s N56.46tr, which also represented a 0.10%  value gain.

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The upturn was driven by position taking in the shares of Transcorp, Fidelity Bank, Accesscorp , FBNH and Guinea Insurance among others. This impacted mildly on Year-To-Date gain which inched up to 33.66%. Market capitalization YTD gain stood at N13.05trillion, representing 39.20% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed with the NGX Banking and Insurance closed higher by 1.10% and 0.58% respectively, while, NGX Consumer  goods was down with 0.05%, while  NGX Energy and Industrial goods  finished flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 26:17, while transactions in volume and value were down after investors exchanged 322.66m shares worth N5.82bn. Volume was driven by trades in  UBA, Zenith Bank, Accesscorp, Universal Insurance  and Transcorp.

Ikeja Hotel and Fidelity Bank were the best performing stocks, gaining 10% and 9.88% closing at N7.26 and N8.90 per share respectively on market forces and sentiment. On the flip side, Livestock and CWG lost 10% and 9.79%, closing at N1.44 and N6.45 per share, purely on profit taking.  

Market Outlook

We expect mixed and bearish sentiment continued in the face of plan bank recapitalsiation as more corporate earnings inflow with dividend announcements, while taking advantage of pullbacks to position and rebalancing 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