Market Update for August 5

Trading activities on the Nigerian Exchange started for the week on a mixed session closing lower, just like the global stock markets recorded a black Monday arising from many factors related to the Yen carry-trade collapse, bursting of the general AI bubble and looming geopolitical crisis that has the potential to exacerbate the situation even further. Add this to the brewing recession and the US Feds’ cautious stance.

The benchmark NGX All-Share index halted gains of the previous sessions as a result of selloffs in highly priced stocks and some blue chip companies in the midst low traded volume and positive market internals that creates opportunities for market players to pick value stocks at discounted prices. This is especially now that corporate numbers reveal the position of many companies on the exchange, despite the ongoing economic headwinds. It is clear that many companies are undervalued with significant long-term growth potential to drive prices in the short to long run.

These changing market fundamentals are despite the ongoing nationwide protest against bad governance today and the seeming turmoil in the matured markets and economies. Pullbacks and corrections are a different phase of any stock markets across the world that requires change in strategies to navigate these rough waters and roads. Smart money moves any moment from now will further give insights, but stay with value and defensive stocks, as numbers released so far have been mixed, while earnings of low cap stocks beat market expectations. This is especially true of service providers like banks, insurance and others in the face of low valuation and pullbacks in the market.

Meanwhile, pullbacks and corrections continued in some major sectors of the market, a situation that kept the index’s action below the T-Line, revealing the weak momentum and downtrend. The market continues to trade within the value area, creating entry opportunities for discerning investors and smart traders, even as transaction volume patterns and support levels signal entry into the ‘buy zone’ at the peak of the quarterly earnings season and dividend announcement. This downtrend could reverse on the strength of these corporate numbers despite the mixed performance, as many value and growth stocks are undervalued.

The NGX index’s action remains below the T-line, while the two moving averages of 50-EMA and 50-SMA indicate weakness 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 amid the oscillating oil production output even as the Naira continues to depreciate at a time that oil is selling below $80 per barrel at the international market.

Meanwhile, during the session, MTNN notified the NGX of the buyout of the minority shareholder of Momo Payment Service Bank Limited, making it wholly owned subsidiary. Tourist Company also filed resolutions from its recently held Annual General Meeting to the market, while Airtel Africa continues to update the Exchange of its ongoing share buyback programme. Also, SterlingNG, Ucap and Linkage Assurance informed the exchange of insider dealings in their 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 weak and on the downtrend with mixed sentiment and weak momentum as revealed by the candlestick formation and momentum indicators. The ADX is looking up at 32.74, while RSI and Money Flow Index were down to read 30.05 and 35.62 points against the previous session 31.30 and 36.02 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market slowly, despite position taking in some sectors. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in some sectors in the midst of players digesting half year numbers.

To navigate the rest of this 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 were down on Monday, continuing its oscillation to trade below $80 per barrel in the midst of growing fears of Russia altering OPEC production and recession on weak macroeconomic data from the two largest economy. The US Feds is likely to cut rate in the face of increasing geopolitical tension across many economies. 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.

Monday’s trading opened on the upside before pulling back, oscillating for the rest of the session on profit taking in MTNN and other stocks, while there were buying interests in consumer goods and other sectors. This situation pushed the NGX’s index to an intra-day low of 97,740.10bps from its highs of 97,939.60bps, before closing below its opening level at 97,582.39bps.

Market technicals for the session were weak and mixed with higher volume when compared to the previous session in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 26% buy position and 74% sell volume. The total transaction volume index stood at 0.62 points, just as energy behind the day’s performance was relatively weak as Money Flow Index was down to read 35.62pts, from the previous day’s 36.02pts, indicating that funds left the market.

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Index and Market Caps

At the end of Monday’s trading, the composite NGX All-Share Index shed 163.32 basis points, closing at 97,582.41bps after opening at 97,745.73bps, representing a 0.17% decline. Market capitalization fell by N92.73bn, closing at N55.41tr from the previous day’s N55.50tr, which also represented a 0.17% value loss.

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.

To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling, and repositioning as we await an economic reform policy that can stimulate and re-track the economy to the path of growth and development.

Meanwhile, the downturn was driven by profit taking and selloffs in MTNN, Transcorp, SterlingNG, AXA Mansard, Veritas Kapital, Japaul Gold and Mecure among others. This impacted negatively on Year-To-Date growth slide to 30.51%. Market capitalization YTD gain grew to N10.89tr, representing 35.41% above its opening level for the year. 

Mixed Sector Indices

Sectoral performance indexes were mixed, as the NGX Insurance and Energy closed lower by 0.03% and 0.01% respectively, while NGX Consumer goods index led the advancers after gaining 0.89%, followed by Banking and Industrial goods with 0.19% and 0.03% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 27:25, while activities in volume and value were up after investors exchanged 324.02m shares worth N6.22bn. Volume was driven by trades in Zenith Bank, UBA, Verita Kapital, Oando and Accesscorp.

Presco and Sovereign Trust Insurance were the best performing stocks, gaining 10% each, closing at N485.10 and N0.55 per share respectively on the back of impressive earnings and sentiment respectively. On the flip side, Chams and University Press lost 10% and 9.92% respectively, closing at N1.98 and N2.18 per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiments on increased volatility, profit taking and sector rotation amidst 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