Market Update for August 20 

The mixed sentiment on the Nigerian Exchange continued on Tuesday as the benchmark NGX All-Share index inched up in the green to halt the sixth successive sessions of bear transition in the face of a very high traded volume and negative market breadth. Even when the higher volume is a sign of strength returning to the market, this volume was majorly driven by a cross deal in Jaiz Bank, in addition to the buying interest in blue chip companies across some sectors of the market that supported the seeming rebound.

That notwithstanding, the fact that the market closed higher, trading around the strong support level of 95,843.10 and below psychological line of 96,000 is a sign of buy zone opportunities for discerning investors and traders who desire to buy into value. The downtrend is likely to reverse soon as all eyes are on the expected outcome of midweek Treasury Bill primary market auction after the latest inflation data slowdown and ahead September MPC meeting. This may impact positive on the market if rates or yields in the fixed income further decline.  As it will further boost the ongoing sector rotation and portfolio realignment on the exchange, considering the oversold state of the market and some stocks. However, players should understand volatility and technical tools that will help profit from the current market trend.

Mixed momentum and sentiments continued to reflect in the market dynamics of volatility that creates the needed opportunity to buy low and sell high, especially as most of the listed companies have become undervalued owing to the recent downtrend in their share prices, even as the pullbacks are driven by high cap stocks that are facing selloffs due to sector rotations and portfolio rebalancing. This pullback below the 96,000 psychological line, T-line and 50-Day Moving Averages confirms the weakness of momentum and the distribution phase of the market.

Position taking across some major sectors of the market also weighed in on the NGX, creating opportunities for market players to pick value stocks at discounted prices. This is especially true now that corporate numbers reveal the position of many companies on the exchange, despite the ongoing economic headwinds as revealed by economic data. The selling sentiment and pullback are a different phase of market that requires change in strategies to navigate and follow the trend. It is expected that smart money will take advantage of the oversold state in the market to buy into value and defensive stocks to support rebound any moment from now.

The NGX index’s action remains below the T-line and the two moving averages of 50-EMA and 50-SMA indicate weakness 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 rebounding to sell below $80 per barrel at the international market.

On Tuesday, NPF Microfinance notified the exchange of its board’s approval of 2023 the audited financial, while Aluminum Extrusion extended the time to meet its free float requirement. Airtel Africa continues to update the Exchange of its ongoing share buyback programme.  Also, BUA Foods notified the market of it wheat flour capacity expansion which is likely to impact its bottom line, while, E-Tranzact, Ucap and The Initiates 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 still weak on rebounding with buying sentiments as revealed by the candlestick formation and momentum indicators. The ADX is looking up at 28.53, while RSI and Money Flow Index were up to read 29.68 and 29.42 points against the previous session 28.22 and 26.11 points respectively. Market players should watch this current trend and trade with caution in the face of funds returning to the market, 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 economic data and expected TB primary market auction outcome.

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Oil prices on Tuesday inched up to continue its oscillation as it trades at $77.20 per barrel in the midst of  oil production being threatened as Libya’s political turmoil deepen and ceasefire talk in the Middle East conflict entered another stage. As rising geopolitical uncertainties across many economies is a threat to the global economy. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Trading started in the green and it was sustained throughout, despite oscillating on buying interest in blue chip companies and profit taking, a situation that pushed the NGX’s index to an intra-day high of 95,904.95bps from its lows of 95,764.24bps, before closing above its opening level at 95,895.92bps.

Market technicals for the session were positive and mixed with higher volume 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 94% buy position and 6% sell volume. The total transaction volume index stood at 1.85 points, just as impetus behind the day’s performance was relatively weak as Money Flow Index was up to read 29.42pts, from the previous day’s 26.11pts, indicating that funds entered the market.

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Index and Market Caps

The NGX All-Share Index at the end of Tuesday inched up by 116.63 basis points, closing at 95,895.92bps after opening at 95,779.79bps, representing a 0.12% up. Market capitalization rose by N66.13bn, closing at N54.45tr from the previous day’s N54.38tr, which also represented a 0.12% value gain.

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Tuesday’s upturn was driven by position taking and buying interest in Seplat, Oando, Stanbic IBTC, Fidelity Bank, Aiico, Mansard  and Cutix among others. This impacted mildly on Year-To-Date growth inched up to 28.25%. Market capitalization YTD gain fell to N10.23tr, representing 33.07% above its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were up, save for  NGX  Consumer goods Index that  closed lower by 0.08%, while the NGX Banking  led the advancers after gaining 0.44%, followed by  Energy, Insurance and Industrial goods with 0.43% , 0.23% and 0.02% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 23:19, while activities in volume and value were mixed after investors exchanged 1.01b shares worth N7.69bn. Volume was driven by trades in Jaiz Bank, SterlingNG, International Brew, FCMB and Accesscorp.

Learn Africa and Oando were the best performing stocks, gaining 9.94% and 9.90% respectively, closing at N3.87 and N43.30 per share respectively on the back of market forces and sentiment respectively. On the flip side, Thomas Watty and Omatek lost 9.71% and 6.85% respectively, closing at N1.58 and N0.68 per share, purely on selloffs.

Market Outlook

We expect mixed sentiment ahead TB auction outcome as bargain hunting continue on 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