Mixed Sentiment As Investors Book Profit, Rebalance Portfolio, Digest Earnings Inflow 

Market Update for April 3

The bearish sentiment on the Nigerian Exchange continued at the midweek, as the benchmark NGX All-Share index closed lower on a very high traded volume in the midst of market players digesting the corporate earnings released so far and portfolio repositioning on the strength of scorecards for 2024 first quarter earnings’ reports. Meanwhile, all eyes are still on the expected consumer price index report for the month of March from the National Bureau of Statistics.

During midweek’s session, Nigerian Breweries notified the exchange of its proposed primary market activities by way of right issue, while Transcorp Plc and BUA Foods presented their full-year audited accounts with impressive numbers, following which the directors recommended dividend of 10 kobo and N5.50 respectively.

Investors and traders are still interpreting and analyzing the mixed corporate earnings and macroeconomic numbers which reveal the state of the economy and impact of the ongoing government policies, pushing prices of goods and services to their all-time high. Today also, inflation in Nigeria is at its 28-year high, while interest rate reached its historic peak in the country, pointing to the possibility of an economic contraction.

However, relative stability has returned to the foreign exchange market in the aftermath of the latest intervention by the Central Bank of Nigeria by clearing FX backlogs. This had led to the recent appreciation in the value of the Naira against the US Dollar.

The NGX index’s action continues to range, remaining in its distribution phase and a top reversal chart pattern that signal correction and pullback as witnessed at the end of the day trading, just as the trend is likely to continue which needs confirmation depending on market forces as trading opens today. 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. It does seem that monetary authorities has sacrificed the economy on the altar of attracting foreign inflows with the increasing interest rate for improved foreign exchange supply that will help address FX challenges and checkmate inflation. Already, the CBN says it has cleared all genuine FX backlogs, which is why the Naira has started appreciating, just as external reserves is looking up after many months of decline. We can only hope that this will support productivity and attract foreign investors.

Notification for closed period and board meetings to approve unaudited Q1 2024 reports continue on the NGX, as the latest came from Consolidated Hallmark Holdings, Transcorp Hotel, UACN, Morison, Nahco and Ronchess Global Resources among others, while Airtel Africa updates the market on the ongoing share buyback. 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 still relatively strong as selling sentiment persists as revealed by candlesticks formation and momentum indicators. The change in strength and energy signaled  weakness in the market, as ADX is looking down at 35.61, while RSI and Money Flow Index are also declining to read 60.54 and 61.86 points against the previous session 63.13 and 70.49 points respectively.  These indicates change in trend, market players should watch out and trade with caution after the index had formed a top pattern and momentum is becoming weak. 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 at midweek was up to continue its oscillation, as it trades at $89.35 per barrel in the midst of traders concerns for production cut  and distractions of geopolitical tensions in the Middle East and others. Even as US crude inventories rose. 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 oscillate. This trend may likely continue in 2024, this up and down movement that drive volatility. As middle East conflict and war in Ukraine last.

Midweek’s trading started slightly in the upside but pulled back to oscillates, on profit taking in financial stocks and others, a situation that  pushed the NGX’s index to an intraday low of 104,181.30bps from its highs of 104,539.2bps, before closing below its opening figure at 104,181.30bps.

Market technicals for the session were negative and mixed, 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 0% buy position and 100% sell volume. The total transaction volume index stood at 1.07 points, just as momentum behind the day’s performance was relatively strong as Money Flow Index is looking down to read 61.86pts, from the previous day’s 70.49pts, indicating that funds left  the market.

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 Index and Market Caps

At the close of trading on Wednesday, the composite NGX All-Share Index shed   336.82bps, closing at 104,181.32bps after opening at 104,518.14bps, representing a 0.32% decline, just as market capitalization fell by N190.44bn, closing at N58.91tr from the previous day’s N59.10tr, which also represented a 0.32%  depreciation in  value.

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Meanwhile, the session downturn was driven by profit taking in the shares of FBNH, Transcorp, UBA, Accesscorp, GTCO, Zenith Bank, Stanbic IBTC and Oando among others, which impacted negatively on Year-To-Date gain which reduced to 39.33%. Market capitalization YTD gain stood at N13.94trillion, representing 40.87% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed, with the NGX Consumer and Industrial goods closing 0.16% and 0.01% higher respectively, while the NGX Banking led the decliners after losing 2.36%, followed by Insurance with 2.07%. Just as NGX Energy finished flat.

Market breadth turned negative as losers outnumbered gainers in the ratio of 32:20, while activities in volume and value were down after investors exchanged 405.03m shares worth N8.91bn. Volume was driven by trades in  Accesscorp, UBA, Transcorp, Zenith Bank and GTCO.

University Press and SCOA were the best performing stocks, gaining 9.84% and 9.69% closing at N2.68 and N2.15per share respectively on market forces and sentiment. On the flip side, Caverton and IEI lost 10% each, closing at N1.62 and N1.44 per share, purely on profit taking.

Market Outlook

We expect a mixed sentiment in the midst positioning and profit booking as players digest the 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