Mixed Sentiments Yet As Investors Digest April Inflation Data, Amid Low Price Attraction

Market Update for May 15

The bearish nature of the Nigerian Exchange continued at the midweek slowed down in the midst of continued selloffs, as the National Bureau of Statistics (NBS) released the Consumer Price Index for April showing that the inflationary pressure lingered within the period, hitting a new all-time high of 33.69%. The latest inflation data, therefore thrown the benchmark NGX All-Share Index year-to-date return into negative, made worse by the prevailing high interest rate and fixed income market yields that continue to attract inflows from foreign retail and institutional investors, especially to Treasury Bills, the open market operation and others.

The composite NGXASI closed lower, thereby extending its bearish transition for the fourth consecutive trading session in the face of low traded volume, negative market breadth and mixed sentiments, ahead of next week’s meeting of the Monetary Policy Committee.The market is also expecting more corporate earnings inflow and Q1 GDP report that will reveal the state of the nation’s economy in the first three months of 2024.

The continued pullbacks confirmed the market’s entry into the decline phase amid the changing market fundamentals, dynamics and mixed numbers released so far, even as selloffs and profit taking continue in highly priced and blue chip stocks, weighing on the market.

However, the correction and pullback are creating buy opportunities for discerning investors and bargain hunters as the dividend rain continues with qualification and payment dates to guide positioning. Market players have continued to digest inflation report and reposition their portfolios on the strength of Q1 numbers and changing market dynamics. Dividend incomes are yet to provide some level of liquidity to support the market, despite the ongoing dividend payments and AGM meeting held so far.

The NGX’s weakness in the midst of mixed sentiment across the major sectors of the market dragged the benchmark index southward. Investors and traders are expected take advantage of the low prices and valuation to buy into value, given the oversold state of the market and mixed technical position as revealed by the double bottom chart pattern at the end of midweek trading which signals reversal of trend or continuation that needs to be confirmed. Already, the Q1 scorecards, expected corporate and economic numbers are the likely game changers, depending on the state of these numbers and unfolding happenings in the economy to further give insight and guide player’s decisions.

The NGX index’s action still trades below the T-line and 50-Day Moving Average, confirming the weight of mixed sentiment in the market and weak momentum, as the index slide lower on a low traded volume and negative market internals below the 8-day moving average exponential and 50 DMA to confirm continuation of trend or reversal depending on market forces and liquidity level. Market players are also looking at 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.

Annual General Meetings and board meetings notification continued on the NGX with the latest from ETI, Custodian Investment, CAP, Berger Paints, Presco, among others, as Airtel Africa continues to update the market on its share buyback. Also, Initiates Plc and McNichols informed the market of their insiders dealing. Therefore, investors should 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 weak and continues to look southward on a mixed sentiment as revealed by candlesticks formation and momentum indicators. As ADX is looking down at 30.39, while RSI and Money Flow Index are mixed to read 31.41and 45.58 points against the previous session 31.89 and 44.73 points respectively. Market players should watch this current trend and trade with caution after the index had pulled back again in the face of funds entering the market slowly. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and selloffs in the midst of a decline phase.

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 at midweek rebounded, as it continues its oscillation to trade at $82.85 per barrel in the midst of improved traders sentiments for higher demand and weak dollar. As US inventories decline in the face of Middle East conflict continued to drive mixed global macroeconomic data and unclear policy direction of major central banks. 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 rally. This trend may likely continue in 2024, this up and down movement that drive volatility. As middle East conflict and war in Ukraine last.

Midweek’s trading started in the red and was sustained for the rest  the session, despite oscillating on profit taking and positioning  in some stocks, a situation that pushed the NGX’s index to an intra-day low of 97,326.67bps from its highs of 97,516.36bps, before closing below its opening figure at 97,386.62bps.

Market technicals for the session were negative and mixed, as volume was lower when compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 32% buy position and 68% sell volume. The total transaction volume index stood at 0.63 points, just as energy behind the day’s performance was  relatively weak as Money Flow Index inched up to read  45.58pts, from the previous day’s 44.73pts, indicating that funds entered  the market, despite closing lower.

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Index and Market Caps

The benchmark NGXASI, at the end of midweek trading slide by  87.36bps, closing at 97,386.62bps after opening at 97,473.98bps, representing a 0.13% dorp, just as market capitalization fell by N73.85bn, closing at N55.06tr from the previous day’s N55.13tr, which also represented a 0.13% value loss.

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Midweek’s downturn was driven by selloffs and profit taking in the shares of UACN, NB, Unilever, Transcorp, Accesscorp, Zenith Bank, FBNH and Prestige Assurance among others. This impacted mildly on Year-To-Date gain which reduce to 30.18%. Market capitalization YTD gain stood at N11.01tr, representing 36.08% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were in red, save for the NGX Industrial Goods and Energy  that closed flat, while the NGX Banking index led the decliners after losing 1.67%, followed by Insurance  and Consumer goods with 0.43% and 0.20% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 29:13, while transactions in volume and value were up after investors exchanged 355.55m shares worth N7.14bn. Volume was driven by trades in  GTCO, Accesscorp, Tantalizer, Prestige Assurance and  UBA.

Custodian Investment and IEI were the best performing stocks, gaining 9.63% and 9.29% respectively, closing at N10.25 and N1.53 per share respectively on market forces and earnings expectation. On the flip side, FTN Cocoa and PZ lost 10% each, closing at N1.44 and N20.25per share, purely on selloffs.

Market Outlook

We expect mixed sentiments to continue as players continue to digest April CPI, low price attraction, dividend investing and reactions to Q1 numbers as Insurance corporate earnings are expected with dividend announcements and CPI report today, 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.

Ambrose Omordion

CRO|Investdata Consulting Ltd