Market Update for June 17
The pullback on the Nigerian Exchange continued Tuesday in the midst of profit taking and reactions to conflicting reports on the Central Bank’s circular suspending banks from paying dividend and embark on any executive compensation, bonuses to directors and halting offshore investment in the name of capital consolidation that had trigger selloffs in some first tier banks and others.
This had weighed on the market as the indicators closed lower on an above average traded volume and negative market internals, even as the market awaits CBN clarification in the face of mixed sentiment and easing inflation ahead of the half year earnings reporting season and the planned policy meeting in July. The NGX index’s action retraced back, trading below the 115,000 basis points psychological line to remain in the distribution phase of the market that signaled a continuation, or reversal as trading opens at the midweek, depending on market forces.
This mixed sentiment followed sector rotation and portfolios realignments by market players in the midst of shaking investor confidence and digesting of the recently released consumer price index ahead of quarter-end window dressing and unfolding global economic direction as uncertainties and geopolitical tensions remain on the rise.
What does this Money Flow looking down mean for the short to longer-term momentum? Will this trend continue or reverse? There is need to avoid panic selling. However, let your trading plan and investment objective guide your entry and exit. As improving macroeconomic data points to where the economy is heading on government’s economic reforms but the seeming de-marketing of the nation’s banks by regulator, is also affecting the national economy and the government negatively. Clear communication and consultation of other regulators is necessary to avoid dampening of investor confidence on the whole process of banking recapitalisation.
Selling momentum is still evident in the market, despite the mixed sentiment at the end of Tuesday’s trading. This pullback was primarily driven by selloffs in banking stocks as +mentioned earlier. Traders and investors should watch momentum, price action and market structure while timing their trades. As NGX recorded another loss again with funds leaving the market, despite position taking in some high cap stocks and blue-chip companies, even as players continue to navigate and watch trends, targeting value on the strength of companies’ performance and prospect, looking at growth and defensive stocks with strong earnings power and positive technicals in the face of sector rotation persisting.
Technically, money flow and other momentum tools were down, indicating that funds left the market on selling momentum that presents opportunities to buy low and sell high in the midst ongoing volatility and uptrend. The index inched lower on a mixed interest of selling and buying, thereby creating the perfect setup for high probability of continuation to catch better-than-expected corporate earnings to reposition at the right price. Also, the index still trades above T-line and the two moving averages of 50-EMA and 50-SMA which reveals strength in the midst of changing market fundamentals and technicals on the NGX and the economy.
Investor sentiment as revealed by candlestick formation and momentum indicators, shows that the ADX is looking up to read 48.49 points, while RSI and Money Flow Index were slighly down at 78.62 and 62.54points against the previous session’s 83.00 and 63.67 points respectively. At this juncture, players should watch the trend and trade wisely in the midst of distribution phase and mixed sentiment in some sectors and profit taking in others on a daily time frame. Also, trading volume pattern continues to oscillate, suggesting smart money are gradually taking profit amid revaluation of the market and short-term opportunities, looking at economic events in the face of policy direction of the government that look inconsistent and global economic outlook in the face of easing trade war and geopolitical tension.
To navigate the rest of Q2 and beyond profitably, it is important to run with economic events, fundamental and technical analysis, join investdata live sessions at noon every Monday, Wednesday and Friday’s trading session “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 pullbacks. Despite the oscillating volume of transaction witnessed in recent time, it is time to position in undervalued stocks, sectors and the next insider playing opportunity.
Oil prices on Tuesday inched higher to continue its oscillation, as it trades at $74.57per barrel, in the midst of escalating Mideast war and digesting of G7 summit outcome. Even as OPEC goes front and back on increasing production or cut output. As soft macroeconomic data emanating from US and China remain a concern for players. Even as US-Russia peace talk and ceasefire in Ukraine continued to shake. The trade tariffs negotiations seem to have fallout to signal global recession and weak economic activities, just as geopolitical tensions across many economies remain a major source of concern to the global economy and energy consumption in 2025. This trend may likely continue, while the up and down movement continues to drive volatility.
Meanwhile, Tuesday’s trading started slightly in the green before pulling back, and it was sustained throughout the session, despite oscillating profit taking on some stocks and buying interest on others. This situation pushed the NGX’s index to intra-day low of 114,573.5bps from its highs of 115,366.20bps, before closing below its opening level at 114,910.20bps.
Market technicals were weak and mixed with higher volume when compared to previous session in the midst of breadth that favours the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 42% buy position and 58% sell volume. The total transaction volume index stood at 1.23points, just as impetus behind the day’s performance was relatively strong, as Money Flow Index was inched up to read 62.54pts, from the previous day’s 63.67pts, indicating that funds left the market.
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Index and Market Caps
The NGX All-Share Index at the end of Tuesday’s trading shed 328.08 basis points, closing at 114,910.20bps from 115,238.24bps, representing a 0.30% decline, while market capitalization fell by N170.40bn to close at N72.50tr from the previous day’s N72.67tr, representing a 0.23% depreciation in value, this different from index was due to the listing of Sterling Financial Holdings additional shares of 6,659,927,623 ordinary shares at N4, arising from the recent right issue.
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The downturn was driven by selloffs and profit taking in the shares of Transcorp Power, UBA, FirstHoldco, Oando, Zenith Bank, Accesscorp, May/Baker, Omatek and International Breweries, among others, which impacted positively on Year-To-Date gain which inched up to 11.40% while Market capitalization gain stood at N15.51tr, representing 15.50% increase over its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Insurance and Industrial Goods indexes closed higher by 0.40% and 0.16% respectively, while the NGX Energy index led the decliners, gaining 1.25% followed by Consumer goods and Banking with 0.50% and 0.20% respectively.
Market breadth was negative as losers outnumbered gainers in the ratio of 35:29, while activities in volume and value were up, after investors exchanged 787.31m shares worth N25.67bn, with volume driven by trades in Zenith Bank, GTCO, UBA, Accesscorp and ETI.
C & I Leasing and Mutual Benefits Assurance were the best performing stocks, gaining 10% each, closing at N4.62 and N1.10per share respectively on the back of sentiment and market forces. On the flip side, Transcorp Power and Oando lost 9.98% and 9.97% respectively, closing at N295.70and N58.25 per share, purely on selloffs and profit taking.
Market Outlook
We expect mixed sentiments on bargain hunting and profit taking, as investors digest CPI and buy into value in expectation of audited corporate earnings of March year end and others in the midst of portfolio reshuffling, even as few audited accounts are expected to hit the market with dividend announcement.
Also, sector rotation and portfolio rebalancing continued in the market with investors taking advantage of price correction 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.
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CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
