Mixed, Bear Sentiments Yet, As Investors Position On Pullback, Digest Latest Inflation Data

Market Update for April 15

The bearish trend and momentum on the Nigerian Exchange persisted Monday, as the first full holiday free week in April opened on a negative note even as investor confidence remain rattled by the new capital base for the nation’s banks and sentiment in banking stocks. Profit taking and selloffs continued as more banks released their audited accounts with corporate actions and Q1 2024 earnings reports hitting the market.

Nigeria’s National Bureau of Statistics (NBS) published the latest Consumer Price data showing that inflation touched another historic high in the month of March at 33.2%, up from 31.7% in the previous month. When compared to same period in 2023, headline inflation increased by 11.2% in one year, more than the real national output that expanded for same period at 2.7%. This is an indication of an economic contraction, with interest rate now at its all-time high of 24.75%. The high interest rate is in a bid by the Central Bank of Nigeria to checkmate the multifaceted runaway inflation that is due to structural issues and mismatch of policies by the fiscal and monetary authorities.

The benchmark NGX All-Share index closed lower on Monday, reflecting the sell sentiments that had lingered for seven straight trading sessions on a low traded volume. This has extended four weeks of negative outing in the face of negative market internals and selloffs in blue chip companies, despite the ongoing earnings reporting season and mixed dividend payouts of the companies which reflected the state of the numbers posted for the year 2023.

Meanwhile, Fidelity Bank presented its audited scorecard for the financial year ended December 31, 2023, while Untied Capital released its first quarter 2024 earnings report. These numbers were impressive, with Fidelity Bank growing its top and bottom lines by 64.91% and 112.86%  to N555.83bn and N99.45bn respectively, translating to Earnings Per Share of N3.11, up; from N1.61 posted in 2022. The directors recommended a dividend of 60 kobo for approval by shareholders at its next Annual General Meeting. United Capital posted gross earnings of N6.15bn in 2024Q1, as against N5.34bn reported in the corresponding period of 2023, and profit after tax of N3.59bn, compared to N2.44bn. This produced EPS of 60 kobo against 41 kobo in the corresponding year.

Market players continued to digest and study the mixed corporate earnings and march consumer price index that reveal the state of the economy and impact of the ongoing government policies. All eyes are on more Q1 2024 financial reports to give more insight were the economy is heading. Despite, the relative stability that has returned to the foreign exchange market in the face of rising inflation, increasing foreign inflow and naira appreciation due to CBN releasing dollar to BDC as intervention and clearing FX backlog.

The NGX index’s action continued to trade below the T line to confirmed weak momentum at the decline phase and correction, the index witnessed another down market the end of the Monday trading, just as this trend is likely to continue which needs confirmation depending on market forces and state of Q1 numbers. As market players also look at 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, even with the continued mismatch of policies and implementation style. As declining oil production in the last months is a minus to the nation reserve.

AGM and board meeting notifications to approve unaudited Q1 2024 reports continue on the exchange. The latest came from Accesscorp, UBA, Lafarge Africa and Meyer Plc, while Airtel Africa updated the market on the ongoing share buyback, even as Abbey Mortgage Bank informed the market of insider 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 NGX is weak as selling sentiment persists as revealed by candlesticks formation and momentum indicators. This indicate weakness in the market, as ADX is looking down at 30.67, while RSI and Money Flow Index are mixed to read 44.25 and 32.90 points against the previous session 47.45 and 28.74 points respectively.  Market players should watch this current trend and trade with caution after the index had formed a correcting chart pattern with weak momentum since the first trading session in Q2. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and profit taking in the face of others investment windows returns remain below inflation as Naira continues to look up in recent days.

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Oil price on  Monday pulled back to continue its oscillation, as it trade at $90.77 per barrel in the midst of escalating tension in the Middle East as Iran attack Israel. Even as traders are watching and US said they are not joining in any strikes. The rising 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’s trading opened slightly in the upside but was short-lived at midday, and pulled back for the rest of the session, despite oscillating on profit taking in financial sector and others, a situation that pushed the NGX’s index to an intraday low of 101,744.90bps from its highs of 102,368.00bps, before closing below its opening figure at 101,778.48bps.

Market technicals for the session were negative and weak, as volume was lower compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 5% buy position and 95% sell volume. The total transaction volume index stood at 0.71 points, just as energy behind the day’s performance was  weak as Money Flow Index is looking up to read 32.90pts, from the previous day’s 28.74pts, indicating that funds entered  the market, despite closing lower.

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Index and Market Caps

At the end of Monday’s trading, the composite NGX All-Share Index lost  536.09bps, closing at 101.778.47bps after opening at 102,314.56bps, representing a 0.52% decline, just as market capitalization fell by N303.19bn, closing at N57.56tr from the previous day’s N57.86tr, which also represented a 0.52% value loss.

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The downturn was driven by selloffs and profit taking in the shares of GTCO, FBNH, UBA, Accesscorp, and Zenith Bank, all first tier banks now in the race for the N500bn minimum capital base decreed by the CBN. Others included Transcorp and Dangote Sugar. This impacted negatively on Year-To-Date gain which reduced to 36.12%. Market capitalization YTD gain stood at N13.46trillion, representing 40.18% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were down, with the NGX Banking and Insurances closing 3.83% and 0.51% lower respectively, while NGX Consumer, Industrial goods and Energy finished flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 32:10, while transactions in volume and value were down after investors exchanged 305.19m shares worth N6.78bn. Volume was driven by trades in  UBA, Transcorp, Accesscorp, Oando and Fidelity Bank.

UPDC and Morison Industries were the best performing stocks, gaining 10% and 9.77% closing at N1.43 and N2.81 per share respectively on market forces and sentiment. On the flip side, Fidelity Bank and Jaiz Bank lost 10% and 9.69% respectively, closing at N9.00 and N2.05 per share, purely on profit taking.

Market Outlook

We expect a mixed and bearish sentiment continued in the face of Investors digesting CPI report and corporate earnings inflow 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