Rebound Likely, NGX Trades Above 50DMA, Amid Sell Sentiments, Price Adjustments, After Investors Loss N601bn
Market Update for the Week Ended April 14 and Outlook for April 17-21
The decline phase of the Nigerian Exchange continued last week in the midst of selling pressure and buying interests, as more corporate earnings flowed in with dividend announcements, alongside some impressive 2023 first quarter scorecards, especially from the financial services providers.
The NGX will likely remain uncertain for some time, meaning that daily swings will occur, punctuated with moments of extreme fear or greed. Traders can take advantage of such swings in both directions, while investors can use drops to buy into great companies at a fair price. A great company with a strong brand equity, and a history of consistent dividend growth, will rarely trade at a great price. But they’re also usually overpriced, and it takes market fear to knock it down to a fair one.
Among corporate earnings released last week were first tier bank- GTCO, GSK, Industrial Medical Gases, Champion Breweries, Regency Alliance Insurance and Abbey Mortgage Bank, which presented their 2022 audited financials. Dividend announcement made included N2.80 from GTCO, 55 kobo, as well as 40 kobo respectively from GSK and Industrial Medical Gases, while others did not recommend dividend for 2022 financial year. Q1 numbers were received from UBA and United Capital, which were impressive, while that of LivingTrust Mortgage Bank came mixed to kick start the current financial year.
The Consumer Price Index for the month of March released by NBS over the weekend came against many analysts expectation of a slowdown. Inflation for the period hit its 18-year high of 22.04% from 21.91% in February, propelled by the cash crunch, in addition to interest rates and yields that continued to drive volatility on the equity market over the past three weeks, while all eyes are on the ongoing transition of government amid hopes of reforms, and policy shifts, among others.
The continued portfolio rebalancing and weak market momentum continue to be reflected on the sentiment and market breadth for the period, as more companies’ share prices were adjusted for dividend recommended. They include Wapco, Transcorp, Consolidated Hallmark Insurance and FCMB for dividends of N2.00, N0.05, N0.03 and N0.25 respectively, coupled with selloffs and profit taking among highly priced stocks like Airtel and other blue chip companies that pulled the market southward. The NGX’s Price-to-Earnings ratio remains relatively low and attractive for investments, following which we foresee a mixed trend in the rest of Q2 and beyond.
To navigate Q2 market volatility and the rest of the year mixed outlook profitably using fundamental and technical analysis to run, join investdata live sessions at noon every 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 market correction. As volume of transaction witnessed within the week remain above the average traded volume, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
Oil price during the week, continued its oscillation to remain resilient after rebounding from its 15-month low, to trade at $86.36 per barrel in the midst of OPEC production cut, rate hikes, fear recession, as the world largest economy goes into mild recession. Coupled with mixed macroeconomic data on China’s economic recovery. We note also the rising geopolitical tensions across the globe and supply disruptions due to the Russia-Ukraine war that has lingered for more than a year now, and is indeed escalating. The up and down movement of oil prices also continues to drive volatility across different investment windows.
Movement Of NGXASI
It was yet another bearish and short trading week on the NGX with three sessions of down market and one day up that followed the Easter Monday holidays, extending the bear transition for the fifth consecutive week on a high traded volume.
This correction or pullback was attributed to low liquidity, the wait-and-see attitude of investors, profit taking, selloffs, reaction to relatively low dividend payout and price adjustment for dividends recommended by company boards. This pushed the index’s action sharply on a sell sentiment, ahead of more corporate earnings that now make the market attractive for technical traders as they keep their eyes on volume, strong support and resistance levels.
The week’s trading opened on a negative note, extending the losses recorded in the previous session as the composite NGX All-Share index lost 1.94%, a trend that was halted at midweek with marginal gain of 0.01% but gave up on Thursday and Friday losing 0.03% and 0.08% respectively. This brought the week’s total loss to 2.08%, in addition to the previous week’s 2.28% negative position.
In all these the benchmark NGX All-Share Index lost a total of 1,100.19 basis points, breaking down another psychological line of 52,000 to 51,893.94bps, from the previous week’s 52,994.13 points closing level. Within the period the index even touched an intra-week low of 51,886.65bps, from its highs of 52,997.10bps. Similarly, market capitalisation fell by N601bn, also representing a 2.08% value loss at N28.27tr, from the previous week’s N28.874tr,
Top gainers chart for the week was dominated by low and medium cap stocks amid selloffs and mixed sentiment in dividend paying companies as volatility and portfolio repositioning continued. Also notable is the fact that market players were accumulating positions after seeing the audited and Q1 results from different sectors as revealed by volume in some stocks ahead of more Q1 numbers. So buying into value, strong earnings and high dividend yield companies continued, as the market’s recovery and correction persisted, heading for 50,000 and 50,486.74 levels again.
Market technicals revealed a negative breadth as losers outnumbered gainers in the ratio of 39:18 on a selling sentiment as indicated by investdata sentiment report showing 2% ‘buy’ volume and 98% sell position. Money Flow Index looking down to read 50.71bps, from the previous week’s 59.63points, an indication that funds left the market on a weekly chart to reflect selloffs and profit taking in major stocks and major sectors of the market, in the face of high inflation rate and uptick in fixed income market yields.
The NGX index’s action extended its pullbacks breaking down the T line and 20 Day moving average, even as it is still trading above its 50 DMA on a very high traded volume to formed a descending triangle or a bearish candlestick that supports a downtrend, which need to be watch in the new week as more financials are expected in the market, despite selling sentiment witnessed last week.
Despite the selloffs, there were yet position taking as the benchmark index traded above its 50 and 100-Day moving average, even as correction is ongoing in the market, the state of the expected numbers and level of liquidity on payment dates will signal reversal or continuation of trend. This depends on market forces as all eyes are on more financials that will give direction as trading opens on Monday. We note that the volume which supported this correction and pullbacks remains mixed and above the market’s traded average, just as reaction to the expected results and others could support reversal at this level.
Bearish Sectoral Indices
The sectorial performance indexes for the week were down, save for the NGX Consumer goods that closed 0.05% higher, while the NGX Insurance led the decliners’ after losing 1.76%, followed by Banking and Industrial goods with 1.40% and 0.40% respectively. Just as NGX Energy closed flat.
Transactions in volume and value were up, as investors exchanged 2.82bn shares worth N10.96bn, compared to the previous week’s 1.05bn units valued at N10.05bn. Volume was driven by Conglomerates, Financial services and ICT Industry, boosted by trading Transcorp, Chams, UBA, Fidelity Bank and Zenith Bank.
Transcorp and International Breweries were the best-performing stocks for the week, gaining 23.36% and 11.11% respectively, closing at N1.69 and N4.50 per share on market sentiment and forces. On the flip side, CHI Plc and Neimeth Pharm had 13.64%and 10.34% respectively, at N0.57 and N1.30 per share, purely on price adjustment for dividend and selloffs.
Outlook for the week
Despite last week’s selling sentiments, the market present value for discerning investor as it trades above the 50 Day moving average that support rebound, depending on market forces in the midst of price adjustment and earnings expectations, just as market players await incoming government agenda and policies. However, retracement to the 51,578.12 level and below is possible on profit taking as global and domestic events unfold.
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605