Market Update for August 8
Energy and strength are gradually returning to the Nigerian Exchange amid increased buying interest across the major sectors of the market as market players digest recent corporate earnings and developments in the fixed income market while inflation continues to hit new highs. Also, rates in the 91 and 182-day tenors remain flat while that of 364-day declined marginally at the end of midweek Treasury bill primary market auction.
The composite NGX All-Share index closed higher, breaking out the 98,000 psychological line again, thereby extending the markup phase in the midst of above average traded volume and positive market internals that reflects position taking in highly priced stocks and blue companies on the exchange due inherit up potentials of many stocks on the strength of their quarterly scorecards and earnings power that drive future prices and support payouts. These are happening in the midst of the global stock markets rebounding after overreactions to the fear of a recession and geopolitical tensions across the globe today.
Position taking in highly capitalized stocks like MTNN, Okomu Oil and other blue chip companies have weighed on the NGX, thereby creating opportunities for market players to pick value stocks at discounted prices. This is especially now that corporate numbers reveal the position of many companies on the exchange, despite the ongoing economic headwinds. It is clear that many companies are undervalued with significant long-term growth potential to drive prices in the short to long run.
These changing market fundamentals are despite the ongoing nationwide protest against bad governance. The buying sentiment and uptrend are a different phase of any stock markets across the world that requires change in strategies to navigate and follow the trend. As smart money take advantage of oversold state in the market to buy into value and defensive stocks, as numbers released so far have been mixed, while earnings of low cap stocks and some highly capitalized companies beat market expectations. This is especially true of service providers like banks, insurance and others in the face of low valuation and pullbacks witnessed in the market recently.
Buying interests across the major sectors of the market have supported the uptrend that pushed the index’s action above the T-Line, revealing the positive momentum and buying sentiment. The market continues to trade within the value area, creating entry opportunities for discerning investors and smart traders, even as transaction volume patterns and support levels signal the ‘buy zone’ ahead of July consumer price index and banks interim dividend announcement. This uptrend could sustained on the strength of corporate numbers but profit taking is imminent, despite many value and growth stocks are undervalued.
The NGX index’s action has crossed the T-line, but trading below the two moving averages of 50-EMA and 50-SMA indicate somewaht in the midst of changing market fundamentals and technicals. We note that the economic reforms of the government, measured by the outpouring of fiscal and monetary policies are yet to put the nation’s economy on the path of recovery, due to the continued mismatch of these and previous ones. There are also issues with the implementation style amid the oscillating oil production output even as the Naira continues to depreciate at a time that oil is selling below $80 per barrel at the international market.
During the trading on Thursday, more companies notified the NGX of their Annual General Meetings the latest from Prestige Assurance and International Breweries, while Airtel Africa continues to update the Exchange of its ongoing share buyback programme. Also, CAP notified the market of resignation of Executive Director. Also, Linkage Assurance and Ucap informed the exchange of insider dealings in its shares. In the midst of all 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 NGX is gathering momentum and strength in an uptrend with buying pressure as revealed by the candlestick formation and momentum indicators. The ADX is looking down at 34.91, while RSI and Money Flow Index were mixed to read 42.87 and 18.46 points against the previous session 28.91 and 18.63 points respectively. Market players should watch this current trend and trade with caution in the face of funds leaving the market slowly, despite position taking in some sectors. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in some sectors in the midst of players digesting half year numbers.
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Oil prices extend gains on Thursday, to continue its oscillation as it trades at $79.27 per barrel in the midst of healthy US economic data and increasing geopolitical uncertainties across many economies. Even as the news of Shararah’s force majeure seems to had pushed prices up. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, as Middle East conflict lingers, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.
Thursday’s trading opened in the upside and its was sustained throughout the session on position taking in blue chip companies, highly priced stocks and others, this situation pushed the NGX’s index to an intra-day high of 98,118.30bps from its lows of 97,101.80bps, before closing sharply above its opening level at 98,118.30bps.
Market technicals for the session were positive and strong, with higher 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 100% buy position and 0% sell volume. The total transaction volume index stood at 1.12 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index was down to read 18.46pts, from the previous day’s 18.63pts, indicating that funds left the market, despite closing in the green.
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Index and Market Caps
The NGX All-Share Index, at the close of Thursday’s trading gained 1,019.32 basis points, closing at 98,118.30bps after opening at 97,098.98bps, representing a 1.05% growth. Market capitalization rose by N577.73bn, closing at N55.71tr from the previous day’s N55.13tr, which also represented a 1.05% appreciation in value.
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The upturn was driven by buying interest and accumulation in MTNN, Okomu Oil, Oando, Zenith Bank, GTCO, Unilever, Cornerstone and Vitafoam among others. This impacted positively on Year-To-Date growth increasing to 31.22%. Market capitalization YTD gain fell to N11.32tr, representing 35.78% above its opening level for the year.
Bullish Sector Indices
Sectoral performance indexes closed green, save for NGX Industrial goods that closed lower by 0.03%, while NGX Banking index led the advancers after gaining 1.72%, followed by Insurance, Consumer goods and Energy with 1.38%, 0.54% and 0.33% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 33:19, while activities in volume and value were up after investors exchanged 791.8m shares worth N15.13bn. Volume was driven by trades in Accesscorp, GTCO, Abbey Building, UBA and Japaul Gold.
MTNN and Unilever were the best performing stocks, gaining 10% each, closing at N198.00 and N18.70 per share respectively on the back of market forces and sentiment respectively. On the flip side, Ucap and Abbey Building lost 9.94% and 8.05% respectively, closing at N14.50 and N2.40 per share, purely on profit taking and selloffs.
Market Outlook
We expect continue trend and mixed sentiment on increased volatility, profit taking and sector rotation amidst oversold region. Portfolios repositioning is however continuing, as investors take advantage of pullbacks to buy into value.
This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, 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
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
