Market Update for the Week Ended July 12 and Outlook for July 15-19
Trading on the Nigerian Exchange in the second week of July closed negative, extending previous week’s loss amid selloffs and bargain hunting across some major sectors of the market ahead of the expected the Consumer Price Index for the month of June.
Investorfs and traders are also betting on the half-year corporate earnings season which has been kicked off by Geregu Power with its impressive numbers showing robust 133% and 149% growth in top and bottom lines respectively to N80.68bn and N20.01bn. The result translated to earnings per share of N8.01, up from N3.22 in the corresponding period of 2023. The result may have given an insight as to what the market should expect from players in the energy sector, among others, even as another meeting of the Central Bank of Nigeria Monetary Policy Committee approaches.
The composite NGX All-Share index closed lower for the second time in July amid portfolio rebalancing in the face of mixed macroeconomic indicators, especially as the government suspended import duties on staple food. This is seen as part of a bid to check the lingering food inflation and the possibility of a food crisis arising from insecurity in many farming communities across the country. Farmers across some major states like Benue, Nasarawa and other traditionally agricultural areas had been threaten by bandits. As many had abandon their farmlands for safety and high tax by bandits before they harvest from their farms.
The expected earnings reporting season is likely to change the current momentum and direction of the market as more companies release their scorecards and beat expectation, with the increased number of companies likely to declare interim dividend. The level of liquidity and outcome of the upcoming policy meeting of CBN will determine how far prices will go. Despite the rising economic headwinds being witnessed today, amid the ongoing economic reforms of the government and relatively stability in the foreign exchange market are combining to boost confidence among local investors.
Technically, the market is consolidating on a weekly chart waiting a trigger to move up or down, while the rebound on Friday signaled revesal that needs confirmation as trading opens this week with all eyes on inflation report from NBS. Sentiment report for the period revealed mixed sentiment, as monry flow index inched up to read 54.37 points on a weekly chart. Trading below the T line on a daily and flat on a weekly time frame to reflect weak momentum. Negative market internal for the period occurred in the midst of profit taking and position taking across different class of stocks. As bargain hunters took advantage of pullbacks to buy into fundamentally sound companies with high yield, strong earnings power and low valuation.
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Oil price during week oscillated to recorded weekly loss, as it trades at $85.03per barrel following weak macroeconomic data from China in the midst of cooling US inflation and positive demand outlook. Even as rising geopolitical tensions threats supply, coupled with Mideast conflict and ongoing war in Ukraine and Russia disrupting oil output in the face of osculating price and OPEC supply cut to manage price. The up and down movement of oil price has continues to drive volatility across different investment windows and inflation again.
Movement Of NGXASI
The NGX recorded a bearish performance in the week under review, with the composite NGX All-Share index closing southward in four sessions, and up once during the week. There was mixed sentiment in the face of expected earnings reports and portfolio repositioning. Cutix during the period announced a 15 kobo dividend and bonus of one new ordinary share for every one held. Also, the share price of Ikeja Hotel and The Initiates Plc were adusted for dividend of 0.075 kobo and 0.06kobo respectively
Trading for the week opened negative, thereby extending the previous week’s loss with the index closing slightly down by 0.01% on Monday, a trend that was sustained on Tuesday when the market fell by 0.20% on profit taking. The index closed flat at the midweek, signaling a reversal which was shortlived on Thursday after pulling back 0.33% on selloffs in Seplat before rebounding on Friday when it gained 0.20% on renew buying interests across some major sectors. This brought the week’s total lost to 0.35%, against the previous week’s 0.04% red position.
In all this, the NGX All-Share Index shed 350.75bps, closing at 99,671.28bps, from previous week’s 100,022.03bps closing level, after touching an intra-week low of 99,417.91bps from a highs of 100,022.20bps. Market capitalisation also fell by N180bn to N56.4tr, representing a 0.25% value loss. The difference between the index and market cap resulted from the technical suspension placed on eight companies by the exchange for failure to file their results within the expected period. Also, there was the listing of Tantalizers Plc’s additional 1.79bn shares from a recent private placement.
The top advancers’ table for the week was dominated by medium and low priced stocks in the midst of bargain hunting and low valuation ahead more earnings hitting the market. Also notable was the fact that market players are still trading with caution, even when taking position and carrying out sector rotation.
Market technicals for the period were weak and mixed as revealed by volume and market breadth. Losers outnumbered gainers in the ratio of 37:33 on a mixed sentiment as indicated by investdata sentiment report showing 42% ‘buy’ volume and 58% sell position. Money Flow Index was looking up at 54.37 points from the previous week’s 53.02 points, an indication that funds entered the market on a weekly time frame, despite closing the week in red.
Technical View
The NGX index’s action is side trending to form a sysmmetrical trigale chart pattern that signaled continuation of trend or reversal, which needs to be confirmed in the new week, as more half year financial reports flow into the market in the face of changing momentum and sentiment, especially from the financial service providers and oil companies. The mixed sentiment for the period in the face of low valuation and mixed macro-econmic data, even when higher yields in the alternative market still remain below inflation rate.
Already, the index has entered the distribution phase on a weekly chart. We note that 98,893.55 and 97,612.51bps are strong support levels on the daily and weekly time frame, even as the index on the weekly time frame is on rangebound. The market is at a critical zone as all eyes are on the more financials to support market fundamentals and attract inflow again. Also, we note that investors are taking long-term positions in the face of dividend expectations and volatility.
We also note that buyers are in control, as revealed by the buying sentiment and positive market breadth, as the index is trading below the T line and above 50-Day Moving Average on the weekly chart.
Mixed Sectoral Indices
The sectoral indexes of the week were mixed with the NGX Oil/Gas and Industrial goods closing 1.38% and 0.05% higher respectively, while NGX Banking led the declincers after losing 2.08%, followed by Insurance and Consumer Goods with 0.36% and 0.09% respectively.
Activities in volume and value rose, as players exchanged 2.77bn shares worth N85.23bn, compared to previous week’s 2.26bn units valued at N31.16bn. Volume was driven by Financial Services, Agriculure industry and Utilities industry, boosted specifically by Fidelity Bank, Ellah Lakes, GTCO,Transpower and Veritas Kapital.
Livestock Feeds and ABC Transport were the best performing stocks during the week, gaining 27.03% and 20.31% respectively, closing at N2.35 and N0.77 per share on market forces and sentiment. On the flip side, Africa Prudential and Thomas Wyatt lost 17.78% and 10% respectively, at N7.40 and N2.16per share, on selloffs.
Outlook for the week
We expect the mixed sentiment and uptrend as more earnings reports hit the market and investors react in the face of portfolio rebalancing and expected inflation data. As all eyes are on upcoming policy meeting. Also, bargain hunters are taking advantage of pullbacks to buy into value stocks. As investors are watching with rapt attention.
However, retracement to the 97,000bps level and below is possible on correction as global and domestic events unfold.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08179547605
