Mixed Sentiments Still On NGX, As Low Valuations Enhance Portfolios Repositioning, Div Investing

Market Update for June 20

Yet another seesaw movement resurfaced on the Nigerian Exchange Thursday, with the composite NGX All-Share index closing flat thereafter, and seemingly halting the loss sustained at the end of previous session. Transaction volume, however, remained very high, just as market breadth stayed positive as the market continued its consolidating chart pattern. These happened in the midst selling sentiment and a distribution phase following which there is the possibility of a continuation of trend or reversal on Friday.

The market inching up slightly in the face of buying interest and profit taking is a reflection of the ongoing portfolio rebalancing ahead of half-year-end window dressing by fund managers. This is expected to usher in the second half of 2024 in the midst of expected earnings reporting season and interim dividend from the banking sector and few other companies. With 100,000 psychological line remaining a strong resistance level to watch, while the momentum indicators slowdown signals mix actions on the NGX.

As witnessed in the previous session, another banking stock- FBN Holdings traded almost a billion shares Thursday, with the majority shareholders increasing their stakes to avoid or reduce dilution in the aftermath of the impending primary market activities. Recall that the FBN Holdings, just like some of its peers, to meet the Central Bank of Nigeria’s new capital base of N500bn for international banks. The improving high volume of trade in the banking sector indicates positioning and confidence in the sector.

With the expectation of yet another earnings reporting season, sector rotation and portfolio repositioning will continue on the exchange ahead of the second half of the year. Service oriented companies have given insights into what players should look forward to after the sectors that supported the nation economy have been revealed by Q1 GDP, especially financial, insurance, aviation, agriculture, oil and tech companies, among others. This trend is expected to continue as nothing has change with the ongoing economic reforms and policy implementation.

The NGX index’s action is still trading above the T-line, 50-EMA and 50-SMA in the midst of selling sentiment and positive momentum. Also, market players are looking forward to quarter end and corporate earnings to reveal the state of companies and economy. 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.

Ahead of Q2 earnings season, Wapco and NCR Nigeria had informed the market of their closed period and board meeting to approve half year reports, in the face of  more Annual General Meetings notifications hitting the exchange, just as other companies presented resolutions from their meetings. The latest came from RT Briscoe, Total Energies and UACN, among others, while NPF Microfinance Bank informed the market of the appointment of a new Chairman. Just as The Initiates Plc, Zenith Bank, FBNH, SterlingNG and Ucap equally updated the market of insiders dealing 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 market is on a pullback zone, as revealed by candlestick formation and momentum indicators. As ADX is looking up at 19.46, while RSI and Money Flow Index are mixed to read 59.07 and 75.87 points against the previous session 59.06 and 90.78points 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 slightly up on Thursday, as it continues its oscillation to trade at $85.43 per barrel in the midst of expected increased supply and positive demand on expected rate cuts by central banks. As increasing geopolitical tension threats many economies even with the expect impact of rate cuts on the economic activities in the face of sticky inflation. 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.

Thursday’s trading opened in the upside and it was sustained, despite oscillating throughout the session on profit taking and  buying interest across the major sectors of the market, a situation that pushed the NGX’s index to an intra-day high of 100,042.70bps from its lows of 99,756.04bps, before closing inching up its opening level at 99,842.82bps.

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 selling sentiment as revealed by Investdata’s Sentiments Report showing 30% buy position and 70% sell volume. The total transaction volume index stood at 2.70 points, just as energy behind the day’s performance was strong as Money Flow Index was down to read 75.87pts, from the previous day’s 90.78pts, indicating that funds left the market, despite closing flat.

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Index and Market Caps

At the end of Thursday’s trading, the NGX All-Share Index inched up by 1.87bps, to close 99,842.94bps after opening at 99,842.82bps, representing a 0.0% flat movement. Market capitalization rose by N0.99bn, closing at N56.48tr from the previous day’s N56.48tr, which also represented a 0.00% 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.

To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling, and repositioning as we await an economic reform policy that can stimulate and re-track the economy to the path of growth and development.

Meanwhile, Thursday’s upturn was driven by position taking in the shares of GTCO, UBA, Mansard, Julius Berger, Guinness, Wapco, Unilever, Chams and Veritas Kapital among others. This impacted mildly on Year-To-Date gain which reduce to 33.53%. Market capitalization YTD gain stood at N11.52tr, representing 38.03% above its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were in green, save for NGX Energy index closed flat, while NGX Banking index led the advancers after gaining 0.72%, followed by Insurance, Consumer and Industrial goods with 0.29%, 0.22% and 0.02% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 35:16, while transactions in volume and value were mixed after players exchanged 1.30bn shares worth N25.33bn. Volume was driven by trades in FBNH, Fidelity Bank, Transcorp, Accesscorp and Aiico.

Champion Breweries and Veritas Kapital Assurance were the best performing stocks, gaining 9.88% each, closing at N3.56 and N0.89 per share respectively on market forces and sentiment. On the flip side, Transcorp Hotel and Regency Insurance   lost 10% and 8.51% respectively, closing at N90.00 and N0.43 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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