NGX In Mixed Mood, Amid Portfolio Realignment On Low Valuations, Q1 Earnings Inflow

Market Update for May 27

The first trading session of the last week of May 2024 on the Nigerian Exchange closed positive, halting three consecutive days of bear transition, following the rekindled buying interest across some major sectors of the market as investors and traders continued to make sense out of the recent macroeconomic and earnings reports.

These economic data and company’s numbers generally reveal the state of the economy and sectors driving growth despite the contracting mood of GDP over the past five quarters. The services sector that supported the economy in 2023 has started on a positive note in the current year to give market players an insight into where to build their tents in the course of 2024. It is no news that government policies and economic reforms moves are yet to yield the much expected results one year after the Bola Ahmed Tinubut administration took over the mantle of leadership, based on the mixed macroeconomic data and the reality on ground today.

In equity investing volatility creates buy opportunities for discerning investors and smart traders, because the positive and negative sentiment are driven by reactions to macroeconomic data, corporate earnings, news, government policies,  regulations, and rules, among others. Every trader who trades for one market condition, knows that the indicator goes up and down, and works until it finally breaks. It always breaks and markets do not always go down-even if you sustain losses on a downtrend. Inevitably, this will breakout or reverse. So, the big secret, for successful investors and traders is timing in any market situation and invest or trade where there is opportunity.

Many operators in the real sector of the economy are already closing shop, or downsizing as a reflection of the impact of the high interest regime of the CBN. All these considered, and as discerning investors, there is need to buy into the dip, targeting undervalued companies with strong potential to grow earnings that support price and payout.

During Monday’s trading session, FBN Holdings released its Q1 2024 earnings reports with impressive numbers, such as the 186% and 315% growth in gross earnings and bottom line respectively to N720.6bn and N208.2bn. These translated to Earnings Per Share of N5.80.

The benchmark NGXASI rebounded, resisting further decline on a less than average traded volume in the face of negative market breadth and mixed sentiment as strength returns gradually to the market ahead of more corporate earnings inflow. Dividend income inflow continues with qualification and payment dates to guide positioning. Market players are still repositioning their portfolios on the strength of Q1 numbers, inflation report and higher rates. 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 is still ranging in the face of mixed sentiment across the major sectors of the market after the benchmark index inched up, as investors and traders take advantage of the low prices and valuation to buy into value. This is normal, given the oversold state of the market and mixed technical position as revealed by the bottom chart pattern at the end of the session which signals a reversal of trend or continuation that needs to be confirmed. Already, the 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, despite testing the 8EMA. Market players are also 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.

AGM notifications poured into the exchange still, the latest being from Fidson Healthcare and Cadbury, while Transcorp Plc, FCMB, John Holt, UBA and Meyer updated the market with resolutions from their meetings with shareholders. Learn Africa also informed the market of insider dealings in its shares. In the midst of 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 downtrend, even as strength and momentum return slowly on a mixed sentiment as revealed by candlestick formation and momentum indicators. As ADX is looking down at 24.12, while RSI and Money Flow Index are up to read 39.43 and 33.01 points against the previous session 36.08 and 25.61 points respectively. Market players should watch this current trend and trade with caution after the index had rebounded in the face of funds entering the market slowly. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and position taking in the midst of a distribution 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 rebounded on Monday, as it continues its oscillation to trade at $82.88 per barrel in the midst of holiday in US and UK, as concerns for rising inflation and longer higher rates in US ahead of OPEC meeting in June. As global demand outlook remain mixed in the face of macroeconomic data from the two largest world economies. As Middle East conflict continued to drive 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.

Meanwhile, Monday’s trading started slightly in the green and its sustained for the rest of the session, despite oscillating on profit taking and positioning in some stocks, a situation that pushed the NGX’s index to an intra-day high of 97,985.61bps from its lows of 97,612.51bps, before closing above its opening level at 97,864.65bps.

Market technicals for the session were weak 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 68% buy position and 32% sell volume. The total transaction volume index stood at 0.98 points, just as impetus behind the day’s performance was weak as Money Flow Index inched up  to read  33.01pts, from the previous day’s 25.61pts, indicating that funds entered the market.

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Index and Market Caps

The NGXASI closed the session gaining 252.14bps, closing at 97,864.65bps after opening at 97,612.51bps, representing a 0.26% up, just as market capitalization rose by N141.89bn, closing at N55.36tr from the previous day’s N55.22tr, which also represented a 0.26% value gain.

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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The session upturn was driven by position taking in the shares of Conoil, UBA, Zenith Bank, Accesscorp GTCO, Fidelity Bank, NB and Guinness among others. This impacted positively on Year-To-Date gain which increased to 30.88%. Market capitalization YTD gain stood at N10.78tr, representing 35.30% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed, even as the NGX Insurance index that closed lower by 0.72%, while the NGX Banking index led the advancers after gaining 2.45% followed Energy and Consumer goods with 1.02% and 0.15% respectively.  Just as NGX Industrial goods finished flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 22:15, while transactions in volume and value were down after investors exchanged 366.98m shares worth N5.94bn. Volume was driven by trades in   Accesscorp, FBNH, UBA, Fidelity Bank and FTN Cocoa.

John Holt and Fidelity Bank were the best performing stocks, gaining 9.60% and 8.43% respectively, closing at N2.17 and N9.00 per share respectively on market forces and sentiment. On the flip side, Caverton and CWG lost 10% each, closing at N1.26 and N5.40 per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiments to continue as players rebalance their portfolios in the midst of low valuation, dividend investing and reactions to Q1 numbers as Insurance corporate earnings are expected with dividend announcements, 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