Mixed Sentiments Ahead, Amid Low Valuation, As Investors Reposition Portfolios Ahead Quarter End

Market Update for June 19

Trading activities at the Nigerian Exchange closed on a mixed session on the first day of trading for the week after the public holidays on Monday and Tuesday to celebrate the Islamic holidays to mark Sallah, with the benchmark NGX All-Share index closing lower. This halted gains seen in the previous session, even as transaction volume was very high and the market closed with positive internals. This was due to profit taking and selloffs in highly priced stocks which weighed on the market as it formed a top pattern reversal amid selling sentiment, and despite opening on a positive momentum, breaking out the 100,000 mark resistance level. The index tested 100,119.80bps, before pulling back in the early afternoon session, after which it stayed at its consolidating pattern and distribution phase. This, however, needs confirmation as trading opens on Thursday.

The market is set to welcome the first primary activity in the banking sector on Thursday June 20, following the directive by the Central Bank of Nigeria (CBN) announcing new capital base for banks in April 2024. Fidelity Bank traded over one billion units ahead of the opening date for it dual offering, while other banks continue to unfold their recapitalisation plans as they work to meet the new capital requirement. The sector is witnessing improved volume of trade, especially buying interest and increased position taking in recent times ahead of the announcement of primary market offer prices and dates. There is also the impact of the expected half-year interim dividend as the quarter gradually comes to an end.

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 selling sentiment and positive momentum. Also, 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.

At the midweek’s session, more Annual General and Board Meetings notifications hit the exchange, just as other companies presented resolutions from their meetings. The latest came from Cutix and Skyway Aviation, among others, while Champion Breweries informed the market on the completion of its acquisition by Enjoycorp Limited, just as FBN Holdings informed the market of the appointment of a new Managing Director and others at First Bank Ltd. The Initiates Plc and Ucap  equally hinted the market of insiders dealing in its shares.

In the face 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 market is topping at a distribution phase, as revealed by candlestick formation and momentum indicators. As ADX is looking up at 18.69, while RSI and Money Flow Index are mixed to read 59.06 and 90.78 points against the previous session 60.38 and 89.32points 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 hit a seven-week high at the midweek as it continues its oscillation to trade at $85.03 per barrel in the midst of demand optimism and continued geopolitical 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,  midweek’s trading started in the green before pulling back to oscillates for the rest of the session on profit taking in blue chip companies and  buying interest in some stocks, a situation that pushed the NGX’s index to an intra-day low of 99,778.78bps from its highs of 100,119.80bps, before closing below its opening level at 99,842.19bps.

Market technicals for the session were negative and mixed with higher volume when compared to the previous session in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 19% buy position and 81% sell volume. The total transaction volume index stood at 3.06 points, just as momentum behind the day’s performance was strong as Money Flow Index was up to read 90.78pts, from the previous day’s 89.32pts, indicating that funds entered the market.

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Index and Market Caps

At the end of the session, the composite NGX All-Share Index fell by a marginal 83.10bps, which pulled it to 99,842.19bps after opening at 99,925.29bps, representing a 0.08% drop. Market capitalization fell by N56.48bn, closing at N56.48tr from the previous day’s N56.53tr, which also represented a 0.08% value loss.

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Midweek’s downturn was propelled by profit booking in MTNN, NB, FBNH, Mansard, Caverton and Wipco among others. This impacted mildly on Year-To-Date gain which reduce to 33.52%. Market capitalization YTD gain stood at N11.52tr, representing 38.03% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX Banking and Energy index closed higher by 0.51% and 0.08% respectively, while NGX Insurance led the decliners after losing 0.14%, followed by goods with 0.09%. Just as NGX Industrial goods Finished flat

Market breadth was positive as gainers outnumbered losers in the ratio of 40:15, while activities in volume and value were up after players exchanged 1.38bn shares worth N16.48bn. Volume was driven by trades in Fidelity Bank, Aiico, Veritas Kapital, UBA and Zenith Bank.

University Press and Guinness Nigeria were the best performing stocks, gaining 10% and 9.96% respectively, closing at N2.75 and N66.25 per share respectively on market forces and sentiment. On the flip side, Caverton  and ABC Transport  lost 9.62% and 9.52% respectively, closing at N1.41 and N0.57 per share, purely on profit taking.

Market Outlook

We expect mixed sentiments to continue in the face of low valuation and portfolios repositioning, dividend investing and  end of the quarter positioning , while taking advantage of pullbacks to buy into value.

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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