Investors Continue Portfolio Rebalancing Amid Low Valuation, Reactions To Insurers’ Earnings Inflow

Market Update for June 4

Profit taking on the Nigerian Exchange continued on Tuesday, as the composite NGX All-Share index slipped again on the back of mixed sentiment and low traded volume, amid the inflow of more March year-end audited scorecards. Also, more companies released their Q3 earnings forecast to guide discerning market players in their investment decision while awaiting the outcome of today’s Treasury Bills’ Primary Market Auction.

Meanwhile, sector rotation and portfolio rebalancing continued in preparation for the second half of the year, as service oriented companies like banks, insurance, telecoms, aviation, tech companies and others are experiencing a slowdown in numbers that will support price in the future. More positive numbers continue to hit the market however.

Government policies that are yet to impact the economy positively are likely to boost some sectors performance, especially looking at the disposition of the fiscal and monetary authorities today. As investors or traders, let the policy direction of the economic mangers guide your investment decisions, going by the prevailing market sentiment that reveals market players psychology.

Despite the mixed outlook for the month June, it presents opportunities to position for the rest of the year.

In its bid to douse the tension that followed the previous day’s revocation of the operational licence of Heritage Bank Plc, the Central Bank of Nigeria (CBN), on Tuesday, assured that there is no plan to withdraw the banking licenses of Unity Bank Plc, or any other for that matter, as been circulated in the social media.

Also, the strike embarked upon by labour unions in the country was suspended for one week to allow for further deliberations with the Federal Government on an agreeable minimum wage for the country. Government has agreed on N60,000 monthly, but labour says that is inadequate considering the rate of inflation and increased cost of living.

Stock trading comes with volatility that creates buy opportunities for discerning investors and smart traders, because the positive and negative sentiment are driven by reactions to macroeconomic data, corporate earnings, news, government policies, regulations, and rules, among others. Every trader who trades for one market condition, knows that the indicator goes up and down, and works until it finally breaks. It always breaks and markets do not always go down-even if you sustain losses on a downtrend. Inevitably, this will breakout or reverse. So, the big secret, for successful investors and traders is timing in any market situation and invest or trade where there is opportunity.

Investing with dates, is another trading strategy in equity trading. As corporate actions that comes with qualification and payment dates help investors and traders to time their positioning. Market players are still repositioning their portfolios on the strength of Q1 numbers and macroeconomic data. Just as dividend incomes had provided some level of liquidity that supported the uptrend witnessed in the last three trading sessions. As dividend payments and AGM meetings continued.

The NGX index’s action is trading above the T-line and 50-Day Moving Average exponential, as the index pulls back in the midst of mixed sentiment and 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.

More Annual General Meeting notifications poured into the exchange, just as other companies presented resolutions from their shareholders meetings. The latest came from Fidson Healthcare, LivingTrust Mortgage Bank and Mecure Industries among others, while Honeywell updated the market of its board appointment. Just as Ucap and The Initiates informed the market of insiders dealing transactions. 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 had entered the distribution phase, as revealed by candlestick formation and mixed momentum indicators. As ADX is looking down at 18.00, while RSI and Money Flow Index are down to read 51.99 and 53.71 points against the previous session 53.45 and 54.35 points respectively. Market players should watch this current trend and trade with caution as profit taking continue in the face of funds leaving the market. Also, trading volume pattern, suggests buying interest in some sectors in the midst profit taking in others.

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 were down on Tuesday, as it continues its oscillation to trade at $77.52 per barrel in the midst of rising US inventories and fear of OPEC increasing supply in the course of the year. Just as global demand is shaking in the face of mixed macroeconomic data from US and China the largest economies. 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.

Tuesday’s trading started slightly in the upside before pulling back to oscillates for the rest of the session on profit taking in financial service stocks and buying interest in others sectors of the market. This pushed the NGX’s index to an intra-day low of 98,976.75bps from its highs of 99,189.66bps, before closing below its opening level at 99,051.02bps.

Market technicals for the session were negative and mixed, with lower volume when 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 35% buy position and 65% sell volume. The total transaction volume index stood at 0.88 points, just as energy behind the day’s performance was relatively weak as Money Flow Index was down to read 53.71pts, from the previous day’s 54.35pts, indicating that funds left the market.

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Index and Market Caps

The benchmark NGX All-Share Index lost a marginal 67.84bps, closing at 99,051.02bps after opening at 99,118.86bps, representing a 0.07% drop, just as market capitalization fell by N38bn, closing at N56.03tr from the previous day’s N56.07tr, which also represented a 0.07% 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 in the shares of Zenith Bank, FBNH, UBA, NB, Mansard, Cornerstone, Unity Bank and Jaiz Bank among others. This impacted mildly on Year-To-Date gain which slide to 32.56%. Market capitalization YTD gain stood at N11.12tr, representing 36.38% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX  Insurance and Banking  index closed lower by 1.53% and 1.45% respectively, while the NGX Consumer goods  index closed higher by 0.36%. Just as Industrial goods and Energy finished flat.

Market breadth turned negative as loser’s outnumbered gainers in the ratio of 22:17, while transactions in volume and value were mixed after players exchanged 347.39m shares worth N7.66bn. Volume was driven by trades in Veritas Kapital Insurance, Fidelity Bank, Oando, Unity Bank and UBA.

NB and Presco were the best performing stocks, gaining 10% and 9.99% respectively, closing at N28.60 and N293.90 per share respectively on market forces and sentiment. On the flip side, Tantalizer and IEI lost 10% and 9.71% respectively, closing at N0.45 and N1.58 per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments to continue as players rebalance their portfolios in the midst of low valuation, dividend investing and reactions to Insurance corporate earnings that are hitting NGX 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