NGX Index Rebounds, Amid Earnings Inflow, Dividend News, Positioning On Low Valuation

Market Update for March 21

Thursday’s was another mixed trading session on the Nigerian Exchange, as the bulls resurfaced on buying interest in highly priced stocks and blue chip companies, especially financial services counters. This pushed the benchmark NGX All-Share index higher, thereby halting three consecutive sessions of bear transition on a low traded volume and negative market breadth. During the session, Deap Capital and The Initiates Plc released their scorecards, which came mixed. Numbers from The Initiates Plc, for example, were impressive, following which the directors offered a dividend of 6 kobo per share, while Deap Capital posted disappointing numbers for 2023, along with its belated reports of 2022, 2021 and 2020. These numbers and more are expected to support the changing fundamentals and give direction, just as sectorial performance for the session was mixed, reflecting position taking in some major sectors of the NGX.

Despite the bullish experience at the end of the session, more  insurance companies continued to notify the exchange of the delay in filing of their 2023 financials, due to the introduction of  IFRS 17 accounting standards by the regulator requiring changes in the disclosures methods and will take time to do adjustment. On the other hand, the apex bank has delayed the approval of banks’ results, a situation that is already affecting investor’s sentiments and confidence in the market. Meanwhile, all eyes are still on the audited accounts of banks, ahead of next week’s meeting of the Monetary Policy Committee (MPC).

Sector rotation and portfolio rebalancing will continue even as the market remained in its distribution phase with a hammer reversal chart pattern to signal an up market. Although, we see government and its economic team trying to return the nation’s economy to the path of recovery, even with the continued mismatch of policies and implementation style that reflects a disconnection between the fiscal and monetary perspectives. It does seem that the MPC has sacrificed the economy on the altar of attracting foreign inflows for improved foreign exchange supply that will help address FX challenges, as CBN has clear all the FX backlog according to them and naira has started appreciating in the face the nation external reserve looking up after many months of decline. Let hope this will support productivity and attract foreign investors.

More companies on the Exchange continue announcing board meetings to approve their 2023 audited financials. The latest are: Ucap, Fidson and Guinness among others. Aiico and Sunu Assurance informed the market of their delay in filing 2023 audited report and Q1 2024 results, while ETI announced the appointment of non-executive directors. Insider dealing updates came from Transcorp Power and MTNN.   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 NGX index’s action is still relatively strong to halt the 3 black crows reversal chart pattern and signaled an uptrend after forming a bullish hammer candlesticks, as momentum indicators were mixed to signal relatively strength in the market, as the ADX inched up at 35.93, while RSI and Money Flow Index are mixed to read 64.49 and 73.24 points against the previous session 64.05and 73.04 points respectively.  As money flow index looks up to indicate funds flowing into equity space and RSI looking up to revealed strength in trend and market, traders should watch out and trade with caution after the index had formed a bottom pattern and momentum is relatively strong. Also, trading volume pattern remained mixed, to suggests rekindled position taking in some sectors and profit taking in the face of others investment windows returns remain below inflation as Naira continues to deprecate.

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 price rebounded on Thursday to continue its oscillation, as it trades at $86.95 per barrel in the midst of Fed  leaving rate unchanged  and US inventories dipped, as tightening supply as a result of rising geopolitical tension across the globe remained a major threat to many economies and the commodity market. Also, OPEC left production cuts unchanged and other factors that impact oil price as it continued to oscillate. 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, Thursday’s trading opened in the downside but rebounded to oscillate throughout the session, on profit taking and buying interest continue in blue chip companies. This situation pushed the NGX’s index to an intraday high of 104,475.69bps from its lows of 103,888.50bps, before closing above its opening figure at 104,387.50bps.

Market technicals for the session were positive and mixed, as volume was higher compared to the previous session in the midst of breadth favoring the bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 85% buy position and 15% sell volume. The total transaction volume index stood at 0.98 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index is looking up at 73.24pts, from the previous day’s 73.04pts, indicating that funds entered the market.

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Index and Market Caps

At the end of trading, the NGX All-Share Index  gained 130.66bps, closing at 104,387.47bps after opening at 104,256.81bps, representing a 0.13% up, just as market capitalization rose  by N73.88bn, closing at N59.02tr from the previous day’s N58.95tr, which also represented a 0.12% value gain.

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The upturn was driven by accumulation in the shares of BUA Cement, Transcorp, Zenith Bank, Ucap, GTCO, UBA, Accesscorp and Guinness among others, which impacted mildly on Year-To-Date gain which inched up to 39.60%. Market capitalization YTD gain stood at N14.42 trillion, representing 43.34% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed, as NGX Consumer goods closed lower with 0.09%, while NGX Banking led the advancers after gaining 0.90%, followed by Insurance and Industrial goods with 0.57% and 0.42% respectively. Just as NGX Energy finished flat.

Market breadth turned negative as loser’s outnumbered gainers in the ratio of 29:22, while activities in volume and value were up after players exchanged 336.82m shares worth N9.29bn. Volume was driven by trades in UBA, Accesscorp, Zenith Bank Transcorp and GTCO.

Juli and Transcorp were the best performing stocks, gaining 10% and 9.96% closing at N7.15 and N14.90per share respectively on earnings expectation and market forces. On the flip side, Deap Capital  and Tourist  lost 10% and 9.86% respectively, closing at N0.63 and N2.56per share, purely on selloffs and poor earnings.

Market Outlook

We expect a mixed sentiment and profit taking to continue as players await the release of more corporate earnings with dividend possibility ahead of next MPC meeting, while Investors take advantage of low valuation 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.

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CRO|Investdata Consulting Ltd