Positive Sentiments Still, Amid Portfolio Rebalancing On Low Valuation, Reactions To Insurance Earnings

Market Update for May 29

The bullish mood on the Nigerian Exchange continued at midweek as the benchmark NGX All-Share index closed higher on a very high traded volume in the midst of positive market internals and buying sentiment, thereby extending the bullish momentum for the the third consecutive session. This is coming ahead of the month-end, making three soldiers in technical analysis in the face of increased position taking in blue-chips, just as insurance companies began releasing their audited 2023 full-year financials with impressive numbers and dividend payout.
The all-expected insurance earnings report had started hitting market with positive numbers to reflect the impact of the 200% in premium and high interest rate that has boosted revenue and supported bottom-lines as revealed by the scorecards released so far. On Wednesday, NEM Insurance, Consolidated Hallmark Plc, Aiico Insurance, Sunu Assurance and Sovereign Trust Insurance recommended 60 kobo, 10 kobo, 5 kobo, 5 kobo and 3 kobo dividends respectively. These impressive numbers are likely to continue in the Q1 earnings reports, as the recent Q1 GDP reports show the contribution of financial sector which includes insurance sector that supported the 2.98% growth of our gross domestic products.

Equity trading  comes with volatility that 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.

Investing with dates, is another trading strategy in equity trading. As corporate actions that comes with qualification and payment dates help investors and traders to time their positioning. Market players are still repositioning their portfolios on the strength of Q1 numbers and macroeconomic data. Just as dividend incomes had provided some level of liquidity that supported the uptrend witnessed in the last three trading sessions. As dividend payments and AGM meetings continued.

The NGX index’s action is trading above the T-line and set to breakout to 50-Day Moving Average, as the index is heading toward the longer moving average to confirm strength on improved momentum. As   market players are 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.

The AGM notifications poured into the exchange still, resolutions from shareholders meetings. The latest came from Beta Glass, SterlingNG, Dangote Cement and Wema Bank among others, while Airtel continued to update the market on its share buyback scheme. Just as The Initiates and others 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 had entered the markup phase, as strength and positive momentum continue on a buying sentiment as revealed by candlestick formation and mixed momentum indicators. As ADX is looking down at 21.54, while RSI and Money Flow Index are mixed to read 50.34 and 40.19 points against the previous session 45.71 and 41.92 points respectively. Market players should watch this current trend and trade with caution as profit taking is possible after the index had sustained uptrend in the face of funds entering the market for three trading sessions. Also, trading volume pattern has improved, to suggests buying interest in some sectors in the midst low valuation.

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 inched up, as it continues its oscillation to trade at $84.56 per barrel in the midst of all eyes on US and Eurozone inflation data in the midst higher and longer rates in US ahead of OPEC meeting in June. As global demand outlook remain mixed in the face of Middle East conflict influencing policy direction of major central banks and economies. 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, midweek trading started in the green and it was sustained for the rest of the session, on buying interest and positioning in blue chip companies , a situation that pushed the NGX’s index to an intra-day high of 98,825.74bps from its lows of 98,383.04bps, before closing above its opening level at 98,818.04bps.

Market technicals for the session were positive and strong, as volume was lower 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 98% buy position and 2% sell volume. The total transaction volume index stood at 1.34 points, just as energy behind the day’s performance was relatively weak as Money Flow Index slides  to read  40.19pts, from the previous day’s 41.92pts, indicating that  entrance of funds into the market slowdown.

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Index and Market Caps

The composite NGXASI at the end of the trading session gained 435.00bps, closing at 98,818.04bps after opening at 98,383.04bps, representing a 0.44% growth, just as market capitalization rose by N246.07bn, closing at N55.90tr from the previous day’s N55.65tr, which also represented a 0.44% 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.

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 upturn was driven by position taking in the shares of FBNH, Dangote Sugar, Nascon, Wapco, Zenith Bank, Accesscorp GTCO, FCMB, Inter Brew and Aiico among others. This impacted positively on Year-To-Date gain which increased to 32.`6%. Market capitalization YTD gain stood at N11.14tr, representing 36.40% above its opening level for the year.

Bullish Sector Indices

The sectoral performance indexes were high except for NGX Oil/Gas index that closed flat, while the NGX Banking index led the advancers after gaining 2.30% followed Insurance, Consumer and Industrial goods with 1.14%, 0.85% and 0.08% respectively.

Market breadth was positive as gainers outnumbered loser in the ratio of 30:15, while transactions in volume and value were down after players exchanged 518.95m shares worth N4.77bn. Volume was driven by trades in Abbey Building, Accesscorp, UBA, FCMB and Fidelity Bank.

Abbey Building Mortgage Bank and Nascon were the best performing stocks, gaining 9.76% and 9.66% respectively, closing at N2.70 and N40.85 per share respectively on market forces and sentiment. On the flip side, International Energy Insurance and Jaiz Bank lost 9.68% and 6.52% respectively, closing at N1.40 and N2.15 per share, purely on profit taking.

Market Outlook

We expect positive sentiments to continue as players rebalance their portfolios in the midst of low valuation, dividend investing and reactions to Insurance corporate earnings that hitting NGX 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