Expect Bargain Hunting On Low Valuation, Repositioning On Pullbacks, Banking Sector Recapitalisation

Market Update for June 10

Monday’s trading activities on Nigerian Exchange started the week on a bullish note, amid increased buying interests in financial services and energy stocks which weighed positively on the benchmark NGX All-Share index. The index closed higher on a very high traded volume, breaking out the recent resistance level of 99,385.00bps and consolidating range in the midst of positive market internals that signals the markup phase.

Banking and holding company continued to release their plans to meet the new capital requirement set by the Central Bank of Nigeria (CBN), which has triggered position taking in the sector. Investors are taking advantage of the primary market offer prices and market value as guide while accumulating for short and long term investment objectives.

The recent announcement by Fidelity Bank of its right issue and public offer price of N9.25 and N9.75 respectively, and that of Accesscorp qualification date for rights issue and price of N19.25 have given the investing public direction of where these banks are going, ahead of the opening dates of their offers and half year earnings reports.

All eyes are still on March year-end audited earnings reports and macroeconomic data such as the Consumer Price Index for the month of May, just as preparations by banks in the country for primary market activities reaches top gear to support market sentiments at the end of Monday trading session. More companies on the exchange had during the session released Q3 earnings forecast which includes Linkage Assurance, Custodian Investment, Unity Bank, University Press, Consolidated Hallmark Holidings, SterlingNG, VFD Group and Geregu Power.

The ongoing sector rotation and portfolio rebalancing will continue ahead of second half of the year in expectation of Q2 earnings reporting season next month. The service oriented companies had given insight what players should look forward to after the sectors had  driven the nation economy again, as revealed by Q1 GDP, especially financial, insurance, aviation, agriculture, oil and tech companies, among others. This is expected to support their numbers going into the future.

The NGX index’s action is trading above the T-line and 50-Day Moving Average exponential, as the index breakout to the ranging trend to test 50-SMA in the face of buying pressure and positive momentum. As market players are looking to more 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, despite the continued mismatch of policies and implementation style as oscillating oil production output persist in the midst exchange market challenges.

More Annual General Meeting notifications poured into the exchange, just as other companies presented resolutions from their shareholders meetings. The latest came from NEM Insurance and Caverton among others, while Airtel Africa continued to update the market on its share buyback. NPF Microfinance and Caverton appoints new director and Chairman respectively, just as Zenith Bank informed the market of insiders dealing in its shares. In the midst of 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 market is trending up at a markup phase, as revealed by candlestick formation and momentum indicators. As ADX is looking down at 16.08, while RSI and Money Flow Index are up to read 59.66 and 67.08 points against the previous session 53.63 and 62.56points respectively. Market players should watch this current trend and trade wisely as uptrend continue in the face of breakout and funds entering the market which need to be confirm as trading opens today. Also, trading volume pattern continued to oscillates, suggesting buying interest in some sectors and with wait and see attitude.

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 prices inched up Monday, as it continues its oscillation to trade at $81.24 per barrel in the midst of expected reports from OPEC and IEA, as all eyes are Fed policy meeting this week, after ECB cuts rates last week to give direction were the major central banks of the world should be looking to boost economic activities in the face of sticky inflation. Just as 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 fall. 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, Monday’s trading opened slightly in the upside which was sustained throughout the session on buying interests in blue chip companies and highly priced stocks, a situation that pushed the NGX’s index to an intra-day high of 99,793.71bps from its lows of 99,221.14bps, before closing sharply above  its opening level at 99,793.71bps.

Market technicals for the session were positive and strong with higher 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 100% buy position and 0% sell volume. The total transaction volume index stood at 2.32 points, just as momentum behind the day’s performance was strong as Money Flow Index was up to read 67.08pts, from the previous day’s 62.82pts, indicating that funds entered the market.

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Index and Market Caps

The benchmark NGXASI close on Monday with a gain of 572.57bps pushing it to 99,793.71bps after opening at 99,222.33bps, representing a 0.58% growth. Market capitalization rose by N323.98bn, closing at N56.45tr from the previous day’s N56.13tr, which also represented a 0.58% appreciation in value.

Attention: If you have not signed up for INVESTDATA’s buy and sell signal setup, don’t delay, because the number of stocks entering their oversold range has increased as market correction and pullbacks call for caution and positive chart patterns to be on our watchlist. These stocks have potentials to retrace, considering their earnings prospects and the oscillating moves in an upmarket and weak economy.

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Monday’s upturn was driven by position taking and buying sentiment in the shares of  Accesscorp, Total Energies, Flourmill, Zenith Bank, Transcorp Hotel, Julius Berger, Chams and Cutix among others. This impacted positively on Year-To-Date gain which increased to 33.46%. Market capitalization YTD gain stood at N11.54tr, representing 37.65% above its opening level for the year.

 Bullish Sector Indices

Sectoral performance indexes were in green, save for NGX Industrial goods index which closed 0.08% lower, while the NGX Energy index led the advancers after gaining 3.13%, followed by Banking, Insurance and Consumer goods with 2.71%, 0.59% and 0.31% respectively.

Market breadth was positive as gainers outnumbered  losers in the ratio of 29:10, while activities in volume and value were up after players exchanged 963.54m shares worth N13.50bn. Volume was driven by trades in Fidelity Bank, Accescorp,UBA, NB and Zenith Bank.

Flour Mill Nigeria and Total Energies were the best performing stocks, gaining 10% and 9.98% respectively, closing at N41.80 and N353.60 per share respectively on market forces and sentiment. On the flip side, Etranzact and Daarcomm lost 9.90% and 9.52% respectively, closing at N4.55 and N0.57 per share, purely on selloffs and profit taking.

 Market Outlook

We expect bargain hunting and mixed sentiment to continue in the face of low valuation and portfolios repositioning, dividend investing and reactions to Insurance corporate earnings, 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