Positive Sentiments Yet On Portfolio Rebalancing, Low Valuation, Reactions To Q1 GDP Data

Market Update for May 28

The positive sentiments on the Nigerian Exchange continued on Tuesday, amid increased position taking across the major sectors and low price attraction and absence of fixed income primary market activities in the last week of May 2024, ahead of more corporate scorecards from the insurance sector among others. Sector rotation and portfolio rebalancing persisted as the market reversal to breakout the 98,000 psychological line on a high traded volume.

The recent macroeconomic data and corporate numbers 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 Tinubu administration took over the mantle of leadership, based on the mixed macroeconomic reports 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.

The composite NGX All Share Index closed higher, extending the positive sentiment and momentum on a very high traded volume in the face of positive market internals and buying pressure, ahead of dividend income in the midst of qualification and payment dates to guide 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 rebound witnessed in the last two trading sessions. As dividend payments and AGM meetings continued.

The NGX index’s action is trading above the T-line but below 50-Day Moving Average, as the index is heading toward the longer moving average to confirm strength. 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, alongside with half year closed period and board meetings. The latest came from Nahco, Stanbic IBTC, Neimeth and Prestige Assurance among others, while Airtel continued to update the market on its share buyback scheme. Accesscorp, 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 signaled uptrend, as strength and positive momentum return on a buying sentiment as revealed by candlestick formation and momentum indicators. As ADX is looking down at 23.18, while RSI and Money Flow Index are up to read 45.71 and 41.92 points against the previous session 39.43 and 33.01 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. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and position taking in the midst of a markup 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 sustained an uptrend on Tuesday, as it continues its oscillation to trade at $84.22 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.

Tuesday’s trading opened on the upside and its sustained throughout 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 98,383.00bps from its lows of 97,857.90bps, before closing above its opening level at 98,383.04bps.

Market technicals for the session were positive and strong, as volume was higher when compared to the previous session in the midst of breadth favoring the bulls on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 1.46 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index moved up  to read  41.92pts, from the previous day’s 33.01pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Tuesday’s trading, the key performance index NGXASI gained 519.70bps, closing at 98,383.04bps after opening at 97,864.65bps, representing a 0.53% growth, just as market capitalization rose by N294.12bn, closing at N55.65tr from the previous day’s N55.36tr, which also represented a 0.53% 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.

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Meanwhile, the upturn was driven by accumulation in the shares of Seplat, UBA, Dangote Sugar, Nascon, NB, Zenith Bank, Accesscorp GTCO, FBNH, PZ and Mansard among others. This impacted positively on Year-To-Date gain which increased to 31.57%. Market capitalization YTD gain stood at N10.84tr, representing 35.86% above its opening level for the year.

Bullish Sector Indices

The sectoral performance indexes were in green, except for NGX Industrial goods index that closed lower by 0.20%, while the NGX Banking index led the advancers after gaining 2.39% followed Energy, Consumer goods and Insurance with 1.88%, 1.11% and 0.74% respectively.

Market breadth turned positive as gainers outnumbered loser in the ratio of 28:13, while transactions in volume and value were up after players exchanged 559.61m shares worth N6.58bn. Volume was driven by trades in Abbey Building, Accesscorp, FBNH, UBA and Zenith Bank.

Dangote Sugar  and Nascon were the best performing stocks, gaining 10% and 9.88% respectively, closing at N42.90 and N37.25 per share respectively on market forces and sentiment. On the flip side, Sovereign Trust Insurance and Universal Insurance lost 9.52% and 8.33% respectively, closing at N0.38 and N0.33 per share, purely on profit taking and selloffs.

Market Outlook

We expect positive sentiments to continue as players rebalance their portfolios in the midst of low valuation, dividend investing and reactions to Q1 GDP 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