Market Update for July 29

Trading activities on the Nigerian Exchange closed mixed on Monday, as the week’s activities started on a negative note, extending the previous sessions of losses for the fifth consecutive days. Traded volume was low, while market breadth was positive in the face of mixed sentiment and corporate earnings, with more scorecards being released to the market ahead of the regulatory deadline for submission of quarterly financials by listed companies. Market players continued to digest the numbers made available in the midst of weak macroeconomic data, a reflection of the mismatch of economic policies.

During the trading session, over 20 companies filed quarterly results to the market and the performance were mixed. Some of the earnings beat expectation while others came in disappointing. Surprising numbers came from Presco, Livestock Feeds, Okomu Oil Palm, Total Energies, Redstar, McNichols. Sovereign Trust insurance, Infinity Trust Mortgage Bank, as well as May & Baker, while others are mixed and below market expectation.

The benchmark NGX All-Share index closed slightly lower, resisting decline to form a double bottom chart pattern that supports a reversal of trend depending on market forces as trading opens on Tuesday. However, the ongoing earnings reporting season is likely to support market fundamentals in the midst of sector rotation, portfolio rebalancing and ongoing primary market activities of the banks that has dominated the market even while consumers and investor confidence is slowing down. Also, private sector businesses are closing down amid economic challenges and over-regulation.

It is important to note that market players should only ignore the market shift at their own risk, since the half-year earnings reports will give insight into economic situation for the period.

Meanwhile, pullbacks and correction continued in some major sectors of the market, a situation that kept the index’s action below the T-Line, revealing the weak momentum and downtrend. The market continues to trade within the value area, creating entry opportunities for discerning investors and smart traders, even as trading volume pattern and support level signals entry into the buy zone at the peak of the quarterly earnings season and dividend announcement. This new downtrend could reverse on the strength of these corporate numbers despite the mixed performance, as many value and growth stocks are undervalued.

The NGX index’s action remains below the T-line, while the two moving averages of 50-EMA and 50-SMA are indicating 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 in the face of 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. It is noteworthy that after weeks of brickbats between the Dangote Group and the Federal Government (the Nigerian National Petroleum Corporation and the country’s oil industry regulator), over allegation of sabotaging the $20bn refinery project, reason is being allowed to prevail with the announcement that crude should henceforth be sold to the Dangote Petroleum Refinery and that it be done in Naira, the Nigerian currency. This is indeed a welcome relief, as the intense media war had sent negative vibes to investors, exposing the nation to ridicule.

On Monday, The Initiates, Omatek and Notore Chemical Industries notified the NGX of its AGM and resolutions from their meetings, while Airtel Africa continues to update the market of its ongoing share buyback programme. Also, Abbey Mortgage Bank and Transcorp Power informed the market of insider dealing 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 still on the downtrend with mixed sentiment and weak momentum as revealed by the candlestick formation and momentum indicators. The ADX is looking up at 23.63, while RSI and Money Flow Index were down to read 29.65 and 48.30 points against the previous session 30.15 and 48.75 points respectively. Market players should watch this current trend and trade wisely 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 interpreting half year numbers.

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Oil price on Monday was down to continue its oscillation, as it trades at $79.98 per barrel in the midst of the  falling U.S inventories  and lingering concerns for China weak economic data, despite the hope of rate cuts in the largest economic. As increasing geopolitical tension across many economies threaten economic activities in the face of cooling inflation. This trend may likely continue for the rest of 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.

Meanwhile, Monday’s trading opened in the green before pulling back to oscillate for the rest of the session on profit taking in banking stocks, while buying interest in others. This situation pushed the NGX’s index to an intra-day low of 98,035.58bps from its highs of 98,258.06bps, before closing marginally below its opening level at 98,132.15bps.

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 mixed sentiment as revealed by Investdata’s Sentiments Report showing 43% buy position and 57% sell volume. The total transaction volume index stood at 0.67 points, just as energy behind the day’s performance was relatively weak as Money Flow Index was down to read 48.30pts, from the previous day’s 48.75pts, indicating that funds slowdown the market.

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Index and Market Caps

At the end of Monday’s trading, the composite NGX All-Share Index slipped by 69.34 basis points, closing at 98,132.15bps after opening at 98,201.49bps, representing a 0.07% drop. Market capitalization fell by N111.77bn, closing at N55.72tr from the previous day’s N55.61tr, which also represented a 0.07% value loss.

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The downturn was driven by profit taking and selloffs in Zenith Bank, FBNH, Transcorp, Ucap, UBA, Nascon, Wapco and Caverton among others, which impacted mildly on Year-To-Date growth as it inched down to 31.24%. Market capitalization YTD gain grew to N11.23tr, representing 35.81% above its opening level for the year. 

Mixed Sector Indices

The sectoral performance indexes were mixed, as the NGX Energy and Insurance indexes closed higher by 1.32% and 0.15% respectively, while NGX Banking index led the decliners after losing 1.01%, followed by Consumer and Industrial goods with 0.07% and 0.01% respectively.

Market breadth was slightly positive  as gainers outnumbered losers in the ratio of 22:21, while activities in volume and value were down after investors exchanged 379.13m shares worth N8.71bn. Volume was driven by trades in UBA, FBNH,Accesscorp, Universal Insurance and GTCO.

Africa Prudential and Cutix were the best performing stocks, gaining 10% and 9.90% respectively, closing at N10.45 and N5.66 per share respectively on the back of dividend news and market forces respectively. On the flip side, Caverton and Coronation Insurance lost 10% and 9.30% respectively, closing at N1.35 and N0.78 per share, purely on profit taking and selloffs.

 Market Outlook

We expect mixed sentiments on reactions to the surprising earnings reports and sector rotation amidst low valuation. 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