Portfolio Realignments Linger On Value Investing Ahead Of Earnings Season Flag Off

Market Update for July 3

Trading activities  on the Nigerian Exchange at the midweek broke out the recent strong resistance level of 100,000 psychological line on a low traded volume and positive market internals in the midst buying sentiment across some major sectors of the market. This was amid the continued position taking and sector rotation ahead of the earnings reporting season that comes with changes in liquidity, momentum, volume and reactions to positive earnings and disappointing numbers to drive volatility that create wealth for discerning investors and smart traders in the new quarter.

The market has set for a new uptrend that is a function of the state of corporate earnings and macroeconomic data as all eyes are on these numbers that will drive flow of funds in the financial market. As such, confirmation is needed to give a direction next week as more companies are set to release their half-year scorecards. The benchmark NGX All-Share Index closed higher, extending the bull transition for a second straight session on oscillating volume pattern that reflects the absent of smart money in the market now as volume remain relatively low.

Changing market structure and fundamentals persist as accumulation phase continues to signaling that the markup phase is underway even as all eyes are on the early filers to give indication and insight. Specifically, market players look to numbers from  Infinity Trust Mortgage Bank, United Capital, Africa Prudential and others. The rest of the year will most likely be dominated by primary market activities of banks and other companies raising funds to recapitalized their operations and businesses.

The NGX index’s action remains above the T-line and the two moving averages of 50-EMA and 50-SMA in the midst of changing market fundamentals and technicals. Also, market players are looking forward to economic data and corporate earnings to reveal the state of economy and companies.  As economic reforms of the government through the fiscal and monetary policies are yet to put the nation’s economy on the path of recovery, due to continued mismatch of policies and implementation style in the face of oscillating oil production output and exchange market challenges. Despite oil price selling above $86 in the international market.

With the half-year earnings reporting season drawing closer, more companies like  Geregu Power, Veritas Kapital Assurance, Ecobank Transnational Incorporated, Consolidated Hallmark Plc, Nahco and McNichols, among others have informed the market of their closed period and board meetings to approve the second quarter earnings report, in the face of more Annual General Meetings notifications.In a similar manner, some other companies presented resolutions from their meetings, with the latest coming from Airtel Africa, while Airtel Africa updated the market of its ongoing share buyback. Just as The Initiates Pls and Eterna informed the market of its insider dealing.  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 has signaled a top pattern reversal as revealed by candlestick formation and mixed momentum indicators. As ADX inched up at 21.13, while RSI and Money Flow Index were mixed to read 63.00 and 62.22 points against the previous session 60.19 and 64.75points respectively. Market players should watch this current trend and trade wisely as reversal is underway in the face of funds slowing down in the market on positioning and profit taking. Also, trading volume pattern continued to oscillates, suggesting selloffs and buying interest in some sectors in the midst of wait and see attitude ahead of Q2 corporate numbers.

To navigate the rest of this 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 at midweek closed higher, continuing its oscillation to trade at $87.12 per barrel in the midst of downtrend pressure on inventories and continued US rate cuts prolong in the face of sticky inflation fear. As mixed economic data from China and others remain also a concern for market players across the globe. Just 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.

Meanwhile, midweek’s trading  started on the upside and was sustained for the rest of the session on positioning across some major sectors, a situation that pushed the NGX’s index to an intra-day high of 100,309.00bps from its lows of 100,071.30bps, before closing above its opening level at 100,299.50bps.

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 buying sentiment as revealed by Investdata’s Sentiments Report showing 96% buy position and 4% sell volume. The total transaction volume index stood at 0.66 points, just as energy behind the day’s performance was relatively strong as Money Flow Index  slide to read 62.22pts, from the previous day’s 64.75pts, indicating that funds left the market, despite closing in marginal green.

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Index and Market Caps

At the end of midweek’s trading, the composite NGX All-Share Index gained 231.71 basis points to close at 100,299.48bps after opening at 100,067.77bps, representing a 0.23% up. Market capitalization rose by N131.08bn, closing at N56.74tr from the previous day’s N56.61tr, which also represented a 0.23% appreciation in 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.

The session was driven by position taking in the shares of Stanbic IBTC, Accesscorp, Zenith Bank, UBA, GTCO, Cornerstone and Wapco among others.  The day’s gains impacted mildly on Year-To-Date growth which rose to 34.14%, while Market capitalization YTD gain stood at N11.85tr, representing 38.65% above its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were up, save for  NGX Oil and Gas index closed flat, while NGX Insurance index led the advancers after gaining  2.74%, followed by Banking,  Industrial  and Consumer goods with 1.41%, 0.17% and 0.03% respectively.

Market breadth turned positive as gainers outnumbered losers in the ratio of 28:19, while transactions in volume and value were mixed after players exchanged 342.20 million shares worth N4.75bn. Volume was driven by trades in Fidelity Bank, Universal Insurance, AIICO, Accesscorp and Cornerstone Insurance.

Cornerstone Insurance and RT Briscoe were the best performing stocks, gaining 9.57% and 9.37% respectively, closing at N2.29 and N0.70 per share respectively on dividend news of 16 kobo and sentiment. On the flip side, University Press and Daarcomm lost 10% and 5.88% respectively, closing at N0.64 and N4.10 per share, purely on profit taking.

Market Outlook

We expect mixed sentiments and position taking to continue until the earnings reporting season kicks off in the face of profit taking and low valuation, as portfolios repositioning continue, 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.


Ambrose Omordion

CRO|Investdata Consulting Ltd