Market Update for July 11

The bear dominance on the Nigerian Exchange continued Thursday as profit taking and selloffs hit highly priced stocks and blue chip companies that weighed down the benchmark NGX All-Share index, forcing it to close lower. Transaction volume was low in the midst of selling sentiments and a positive market breadth.

The expected market reversal was short-lived, extending the bear-run for a sixth consecutive session, and heading to the 98,000 basis points’ mark, just as all eyes are on the Consumer Price Index for June, and the half-year earnings reports in the face of bargain hunting and portfolio rebalancing.

Market correction and pullbacks have created entry opportunities for players, with the trading volume pattern also signaling an uptrend in the making which however needs confirmation as the market enters yet another demand zone in expectation of corporate and economic numbers. When that happens it could give way for a new uptrend, depending on the state of the corporate earnings and macroeconomic indices as all eyes are on these numbers to drive flow of funds in the financial market.

Meanwhile, all eyes are on such early filers like Infinity Trust Mortgage Bank, United Capital, and Africa Prudential, among others. As outlook for the rest of the year remains mixed on the back of the ongoing primary market activities for companies, especially those engaged in banking services to recapitalize, while the Central Bank of Nigeria (CBN) monetary policy moves to checkmate the spiraling inflation militating against the economy amid the high interest and exchange rates challenges.

The NGX index’s action is trading below the 100,000 psychological line and the T-line, even while resisting decline thereby staying above the two moving averages of 50-EMA and 50-SMA in the midst of changing market fundamentals and technical to indicate slowing momentum. We note that the economic reforms of the Ahmed Tinubu 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 continued mismatch of these and previous policies. There are also issues with the implementation style in the face of oscillating oil production output even as the Naira continues to depreciate at a time that oil is selling above $84 per barrel in the international market.

Also on Thursday, Zenith Bank, Cadbury and Abbey Mortgage Bank notified the market of their closed period and board meetings, just as more companies notified the NGX of their forthcoming Annual General Meetings. Similarly, some others presented resolutions at such meetings with the latest coming from Cutix Plc were dividend of 15 kobo and bonus of one share for every one held was announced. Airtel Africa continued to update the market of its ongoing share buyback, while UBA and Julius Berger informed the Exchange of insider dealings in their 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 weak as revealed by the candlestick formation and mixed momentum indicators. As ADX inched down at 19.11, while RSI and Money Flow Index were mixed to read 47.26 and 32.21 points against the previous session 53.41 and 30.82 points respectively. Market players should watch this current trend and trade with caution as reversal is underway in the face of funds leaving the market on profit taking. Also, trading volume pattern continued to oscillates, suggesting selloffs and buying interest in some sectors in the midst of wait and see attitude ahead of Q2 corporate numbers.

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Oil price on Thursday was up as oscillation in its price continued, trading at $85.40 per barrel in the midst of cooling US inflation rate and positive demand outlook. Despite China mixed macroeconomic data and trade war with the west remain a concern for market players across the globe. As increasing geopolitical tension across many economies threats economic activities in the face of sticky inflation. This trend may likely continue in 2024, while the up and down movement continues to drive volatility, even as ceases fire discussion is ongoing to resolve the Middle East conflict, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Thursday’s trading started slightly in the green before pulling back  throughout the session, despite  oscillating on profit taking in energy and consumer goods sectors and buying interest in others, a situation that pushed the NGX’s index to an intra-day low of 99,441.78bps from its highs of 99,827.60bps, before closing below its opening level at 99,468.90bps.

Market technicals for the session were weak and mixed with lower 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 7% buy position and 93% sell volume. The total transaction volume index stood at 0.54 points, just as impetus behind the day’s performance was weak as Money Flow Index  inched up to read 32.21pts, from the previous day’s 30.82pts, indicating that funds entered the market, despite closing in the red.

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Index and Market Caps

At the end of Thursday, the composite NGXASI shed 333.18 basis points, closing at 99,468.90bps after opening at 99,802.08bps, representing a 0.33% decline. Market capitalization fell by N188.48bn, closing at N56.27tr from the previous day’s N56.46tr, which also represented a 0.33% depreciation in value.

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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Meanwhile, the downturn was driven by profit taking and selloffs in the shares of Seplat, Oando, Transcorp, Accesscorp, Dangote Sugar and Honeywell among others.  The day’s loss impacted negativey on Year-To-Date growth as  it reduced  to 33.13%, while Market capitalization YTD gain fell to N11.52tr, representing 37.52% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed, save for the NGX Energy  and Consumer Goods index that closed lower by 4.0% and 0.16% respectively, while the NGX Banking  index led the advancers after gaining 0.13%, followed by Insurance  and Industrial goods  with 0.09% and 0.05% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 22:18, while transactions in volume and value were down after players exchanged 296.73 million shares worth N5.45bn. Volume was driven by trades in Fidelity Bank, Linkage Assurance, Accesscorp, Transcorp and Aiico.

Linkage Assurance  and Daarcomm were the best performing stocks, gaining 9.80% and 9.62% respectively, closing at N1.12 and N0.57 per share respectively on dividend reward and sentiment. On the flip side, Ikeja Hotel and Honeywell lost 9.29% and 8.41% respectively, closing at N6.35 and N3.16 per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments and bargain hunting as pullbacks had created new entry opportunities for discerning market players ahead of earnings reporting season kicking off any moment from now, as portfolios repositioning continue, while taking 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