Mixed Sentiment Yet, Amid Low Stocks Valuation, Portfolio Repositioning On NGX

Market Update for June 13

Equity trading on the Nigerian Exchange continued its seesaw movement Thursday, with the benchmark NGX All-Share index closing higher to halt the previous session’s loss on an above average volume and positive market breadth. This was amid buying sentiment and despite forming a top reversal chart pattern that supports pullback or continuation of trend in the midst of a consolidating pattern and distribution phase that needs confirmation.

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 trade, buying interest and increased position taking in recent times ahead of the announcement of primary market offer prices. 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, 50-EMA and 50-SMA in the midst of buying 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 on Thursday, just as other companies presented resolutions from their meetings. The latest came from PZ and McNichols, among others, while Airtel Africa continued to update the market on its share buyback. Just as initiates Plc, Zenith Bank, Custodian Investment 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 looking up at 17.15, while RSI and Money Flow Index are mixed to read 59.43 and 79.11 points against the previous session 57.73 and 73.90points respectively. Market players should watch this current trend and trade wisely as oscillation continue in the face of a ranging market 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 flat on Thursday, as it continues its oscillation to trade at $82.36 per barrel in the midst of monetary policy concerns and continued tension in the Middle East, even when many central banks had signal possibility of rate cuts 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 continue to influence oil supply and demand.

Meanwhile, Thursday’s trading opened on the upside and it was sustained throughout the session on position taking in blue chip companies and underpriced stocks, a situation that pushed the NGX’s index to an intra-day high of 99,835.02bps from its lows of 99,621.86bps, before closing above its opening level at 99,832.25bps.

Market technicals for the session were positive and mixed 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 99% buy position and 1% sell volume. The total transaction volume index stood at 1.16 points, just as energy behind the day’s performance was strong as Money Flow Index was up to read 79.11pts, from the previous day’s 73.90pts, indicating that funds entered the market.

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Index and Market Caps

NGX All-Share Index, at the end of Thursday trading gained 201.71bps pushing it to 99,832.25bps after opening at 99,630.51bps, representing a 0.20% up. Market capitalization rose by N114.12bn, closing at N56.47tr from the previous day’s N56.36tr, which also represented a 0.20% value gain.

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.

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The session upturn was driven by buying interest in the shares of Zenith Bank, NB, UACN, NEM, UBA, FBNH, GTCO and Wapco among others. This impacted positively on Year-To-Date gain which increased to 33.51%. Market capitalization YTD gain stood at N11.58tr, representing 38.05% above its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were up, save for NGX Energy index that closed flat, while NGX Insurance led the advancers after gaining 1.80%, followed by Banking, Consumer and Industrial goods with 0.98% 0.30% and 0.12% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 30:18, while activities in volume and value were down after players exchanged 502. 60m shares worth N8.65bn. Volume was driven by trades in Zenith Bank, Aiico, Accescorp, GTCO and UBA.

NB and Unity Bank were the best performing stocks, gaining 10% and 9.91% respectively, closing at N31.90 and N1.22 per share respectively on market forces and sentiment. On the flip side, ETI and Daarcomm lost 9.92% and 8.77% respectively, closing at N21.35 and N0.52 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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