Mixed Sentiment May Linger Amid Low Valuation, Portfolios Repositioning, Inflow Of Insurance Earnings

Market Update for June 11

Bearish sentiment resurfaced again Tuesday on the Nigerian Exchange following selloffs and profit taking in highly priced stocks, even while there were buying interest across the major sectors of the market.

The composite NGX All-Share index closed lower on a very high traded volume to form a top reversal chart pattern that supports pullback in the midst of positive market breadth to indicate distribution phase that needs confirmation as trading opens on Thursday.

With banks unfolding their recapitalisation plans to meet the new capital requirement set by the Central Bank of Nigeria (CBN), the sector is witnessing improved volume of trades as buying interest and position taking increased recently ahead of primary market offer prices being unveiled by most of them. There is also the impact of the second quarter earnings reporting session in July. Guaranty Trust Company joined the list of  peers that have notified the investing public of its primary market activities plan.

All eyes are still on the March year-end audited earnings reports and such macroeconomic data as the Consumer Price Index for the month of May, just as preparations by banks in the country for primary market activities reaches top gear to support market sentiments at the end of the day trading session. More companies on the NGX, including NEM Insurance and Learn Africa, during the session released their Q3 earnings forecast.

Sector rotation and portfolio rebalancing on the exchange will continue ahead of the second half of the year. Service oriented companies have given insights into what players should look forward to after the sectors had  driven the nation economy again, as revealed by Q1 GDP, especially financial, insurance, aviation, agriculture, oil and tech companies, among others. This is expected to support their numbers going into the future.

The NGX index’s action is currently trading above the T-line and 50-Day Moving Average exponential, as the index rested on the 50-SMA after breaking out 99,800 bps to touch 99,929.39 level  in the midst of selling sentiment and positive momentum. Just 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 in the midst exchange market challenges.

More Annual General Meeting notifications poured into the exchange, just as other companies presented resolutions from their meetings. The latest came from Presco, among others, while Airtel Africa continued to update the market on its share buyback. As Presco, also made changes on the board, while Ucap, McNichols, Aiico insurance, the initiates Plc informed the market of insiders dealing in its shares. In the face 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 is topping at a distribution phase, as revealed by candlestick formation and momentum indicators. As ADX is looked up at 16.64, while RSI and Money Flow Index are mixed to read 59.66 and 73.90 points against the previous session 59.66 and 67.08points respectively. Market players should watch this current trend and trade wisely as oscillation continue in the face of breakout and funds entering the market which need to be confirm as trading opens today. Also, trading volume pattern continued to oscillates, suggesting buying interest in some sectors and profit taking in the midst of wait and see attitude of players.

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 up on Tuesday, as it continues its oscillation to trade at $82.36 per barrel in the midst of US inflation cooling and Fed leaving rates unchanged, even as it signal possibility of one rate cuts this year. As all eyes are on other major central banks of the world to see the path these banks will follow to boost economic activities in the face of sticky inflation. Just 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 in the green and touched the day’s high before pulling back to oscillate for the rest of the session on profit taking in blue chip companies and highly priced stocks, a situation that pushed the NGX’s index to an intra-day low of 99,571.82bps from its highs of 99,929.39bps, before closing below its opening level at 99,630.51bps.

Market technicals for the session were mixed and strong with lower volume when compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 16% buy position and 84% sell volume. The total transaction volume index stood at 1.96 points, just as impetus behind the day’s performance was strong as Money Flow Index was up to read 73.90pts, from the previous day’s 67.08pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Tuesday’s trading, the benchmark NGX All-Share Index slide by 163.20bps pushing it to 99,630.51bps after opening at 99,793.71bps, representing a 0.16% drop. Market capitalization fell by N92.31bn, closing at N56.36tr from the previous day’s N56.45tr, which also represented a 0.16% 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 and selloffs in the shares of MTNN, Nascon, ETI, Transcorp,FBNH, Oando and May/Baker among others. This impacted mildly on Year-To-Date gain which increased to 33.24%. Market capitalization YTD gain stood at N11.50tr, representing 37.24% above its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were up, led by NGX Energy index after gaining 2.08%, followed by Insurance, Banking, Consumer and Industrial goods with 1.17%, 0.71% 0.10% and 0.01% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 29:18, while activities in volume and value were mixed after players exchanged 848.97m shares worth N16.55bn. Volume was driven by trades in Fidelity Bank, NB, Zenith Bank, ETI and Accescorp.

Total Energies and Presco were the best performing stocks, gaining 9.98% and 9.97% respectively, closing at N388.90 and N323.20 per share respectively on market forces and sentiment. On the flip side, Nascon and Thomas Watt lost 9.91% and 9.66% respectively, closing at N36.80 and N1.59 per share, purely on profit taking.

Market Outlook

We expect mixed sentiment to continue in the face of low valuation and portfolios repositioning, dividend investing and reactions to Insurance corporate earnings, 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.

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