Investors, Traders Bet On MPC Outcome, Q1 Earnings, Macro-economic Data As Game Changers On NGX

Market Update for May 20

Mixed sentiments on the Nigerian Exchange continued Monday with a seesaw movement resurfacing in the midst of a ranging market and bearish transition,on renewed buying interests in the telecomms giants among others which impacted the market positively as it inched up.  The seeming positive sentiment as market players digest the latest macroeconomic data while awaiting the outcome of the Central Bank of Nigeria’s Monetary Policy Committee (MPC) meeting which ends on Tuesday. There is also the 2024Q1 GDP numbers being awaited, even as inflation rate hit yet another all-time-high of 33.69% in the month of April throwing all the investment windows into negative real return, especially the fixed income market instruments. Despite the prevailing high yields, with the benchmark NGX All-Share Index that measures equity market performance which year-to-date gain at 31.%.

The composite NGXASI closed higher, halting the previous loss position on an above average traded volume and negative internals in the midst buying pressure and expected earnings reports. The market expects the GDP reports to reveal the state of the nation’s economy in the first three months of 2024 and the place of government economic reforms policies so far in the last one year. As macroeconomic indices had remained mixed and contracting.

Monday’s rebound signaled a return of strength to the market, but it needs confirmation, despite entering the accumulation phase amid the changing market fundamentals, dynamics and mixed numbers released so far, even as positioning  and profit taking continue in highly priced and blue chip stocks. This impacted the market expectedly.

However, the volatility and pullbacks are creating buy opportunities for discerning investors and bargain hunters as the dividend income continues with qualification and payment dates to guide positioning. Market players have continued to reposition their portfolios on the strength of Q1 numbers, CPI reports, changing market dynamics and rate position as all eyes are on today MPC meeting outcome. Dividend incomes are yet to provide some level of liquidity to support the market, despite the ongoing dividend payments and AGM meeting held so far.

Notwithstanding the NGX’s weakness in the midst of mixed sentiment across the major sectors of the market, the benchmark index closed slightly in the green. Investors and traders are expectedly taking advantage of the low prices and valuation to buy into value, given the oversold state of the market and mixed technical position as revealed by the top chart pattern at the end of Monday’s trading which signals reversal of trend or continuation that needs to be confirmed. Already, the Q1 scorecards, expected corporate and economic numbers are the likely game changers, depending on the state of these numbers and unfolding happenings in the economy to further give insight and guide player’s decisions.

The NGX index’s action still trades above the T-line but below 50-Day Moving Average, confirming the mixed sentiment in the market and relatively weak momentum. Market players are also 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.

Annual General Meetings and board meetings notification continued on the NGX with the latest from Jaiz Bank, Fidelity Bank, among others, as Airtel Africa continues to update the market on its share buyback. Also, Initiates Plc, Vitafoam and Eterna informed the market of their insiders dealing. Therefore, investors should 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 relatively weak but signals reversal on a mixed sentiment as revealed by candlesticks formation and momentum indicators. As ADX is looking down at 30.39, while RSI and Money Flow Index are mixed to read 40.32and 48.53 points against the previous session 39.75 and 49.64 points respectively. Market players should watch this current trend and trade with caution after the index had inched up again in the face of funds entering the market slowing down. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and selloffs in the midst of a decline phase.

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 Monday slowdown, as it continues its oscillation to trade at $83.23 per barrel in the midst of expected rate cuts and positive macroeconomic data from the two largest world economies. As Middle East conflict continued to drive unclear policy direction of major central banks. 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 rally. 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 trading started in the green and was sustained through the session, despite oscillating on profit taking and positioning  in some stocks, a situation that pushed the NGX’s index to an intra-day high of 98,178.32bps from its lows of 97,723.32bps, before closing marginally above its opening figure at 98,177.88bps.

Market technicals for the session were weak and mixed, as volume was higher when compared to the previous session in the midst of breadth favoring the bears 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 0.92 points, just as momentum behind the day’s performance was  relatively weak as Money Flow Index inched up to read  48.53pts, from the previous day’s 49.64pts, indicating that funds left the market, despite closing marginally high.

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Index and Market Caps

The NGX All Share Index, at the end of Monday inched up by 52.15bps, closing at 98,177.88bps after opening at 98,125.73bps, representing a 0.05% up, just as market capitalization rose by N28.61bn, closing at N55.54tr from the previous day’s N55.51tr, which also represented a 0.05% value gain.

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Monday’s upturn was driven by buying interest in the shares of MTNN, Berger Paints, NB, PZ, Transcorp Hotel, Unity Bank, Cornerstone and Coronation Insurance among others. This impacted mildly on Year-To-Date gain which inched up to 31.30%. Market capitalization YTD gain stood at N11.15tr, representing 36.58% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were in red, save for the NGX Industrial Goods and Energy  that closed flat, while the NGX Banking index led the decliners after losing 1.51%, followed by Insurance  and Consumer goods with 0.10% and 0.03% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 28:12, while transactions in volume and value were up after investors exchanged  405.66m shares worth N6.69bn. Volume was driven by trades in  Accesscorp, Transcorp, Zenith Bank, NB and Jaiz Bank.

Berger Paints and Regency Insurance were the best performing stocks, gaining 9.72% and 9.68% respectively, closing at N13.55 and N0.34 per share respectively on market forces and earnings expectation. On the flip side, Champion Breweries and C/I Leasing lost 10% and 9.80% respectively, closing at N2.97 and N3.13per share, purely on selloffs.

Market Outlook

We expect mixed sentiments to continue as players bet on the MPC outcome, low price attraction, dividend investing and reactions to Q1 numbers as Insurance corporate earnings are expected with dividend announcements and CPI report today, 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