Market Update for July 18

Thursday’s was a mixed session on the Nigerian Exchange, with the benchmark NGX All-Share index rebounding and in the process wiping away previous loss position thereby signaling the return of strength to the market on a low traded volume in the midst of negative market internals and formation of a double top reversal chart pattern that support pullbacks or breakouts. This, however, needs confirmation as the index’s action remains above the 100,000 psychological line, just as interim dividend announcement and earnings reporting season already flowing in will likely drive market momentum. It is important that market players ignore this market shift at their own risk, since the half-year result released by one of the early filers in the other financial services industry earnings has given an insight into what the market should expect, as more companies enter into the interim dividend league.

Buying interests continue across some major sectors of the market, a situation that pushed the composite All-Share index above the T-Line, supporting the uptrend, given that every single change in any market and economic condition is a life changing opportunity for wealth creation among players that understand the big picture of the market and economy. As the market continues to trade within the value area, creating entry opportunities for discerning investors and smart traders, even as trading volume pattern and resistance level signal sell zone ahead of more half-year earnings and dividend announcement. This new uptrend could be sustained on the back of the expected company numbers and momentum that comes with earnings reporting season.

The NGX index’s action is trading above the T-line and the two moving averages of 50-EMA and 50-SMA indicates strength in the midst of changing market fundamentals and technicals. We note that the economic reforms of the  Government, measured by the outpouring of fiscal and monetary policies, are yet to put the nation’s economy on the path of recovery, due to the continued mismatch of these and previous ones. There are also issues with the implementation style in the face of oscillating oil production output even as the Naira continues to depreciate at a time that oil is selling below $84 per barrel at the international market.

Also on Thursday, Livestock Feeds notified the NGX of its forthcoming Annual General Meeting, while some others presented resolutions at their own meetings with the latest coming from Jaiz Bank. Airtel Africa continues to update the market of its ongoing share buyback programme, while United Capital informed the market of insider dealing in its shares. 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 NGX is still recovering on a mixed momentum as revealed by the candlestick formation and  momentum indicators. As ADX inched up at 17.22, while RSI and Money Flow Index were mixed to read 63.23 and 50.90 points against the previous session 56.51 and 51.68 points respectively. Market players should watch this current trend and trade wisely in the face of funds entering the market slowing down, despite position taking. Also, trading volume pattern continued to oscillates, suggesting buying interest and profit taking in some sectors in the midst of wait and see attitude ahead of more half year numbers.

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Oil price on Thursday fell marginally and appeared stable while continuing its oscillation, trading at $84.63 per barrel in the midst of the U.S Labour Report that seem to support rate cuts, amid the the declining inventory in the country. Meanwhile, China’s economic challenges and trade war with the West remain a concern to market players across the globe, as increasing geopolitical tension across many economies threaten economic activities in the face of cooling inflation that, none-the-less points to the possibility of rate cuts. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, even as ceases fire discussion is ongoing to resolve the Middle East conflict, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Thursday’s trading on the NGX stared in the upside and was sustained for the rest of the session, despite oscillating on profit booking in financial services stocks and position taking in some other sectors. This situation pushed the NGX’s index to an intra-day high of 100,612.90bps from its lows of 99,830.80bps, before closing above its opening level at 100,503.20bps.

Market technicals for the session were positive and weak with lower volume when 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 86% buy position and 14% sell volume. The total transaction volume index stood at 0.69 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index inched down to read 50.90pts, from the previous day’s 51.68pts, indicating that funds left the market, despite closing in the green.

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 Index and Market Caps

At the end of Thursday’s session, the NGXASI gained 470.89 basis points, closing at 100,503.90bps after opening at 100,032.32bps, representing a 0.47% growth. Market capitalization rose by N262.82bn, closing at N56.91tr from the previous day’s N56.65tr, which also represented a 0.47% appreciation in value.

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The upturn was driven by buying interests in Airtel, Oando, Ucap, Eterna, Flour Mills, Nascon, Cutix and Africa Prudential among others, which impacted positively on Year-To-Date growth as it inched up to 34.41%. Market capitalization YTD gain grew to N12.68tr, representing 39.08% above its opening level for the year.

 Mixed Sector Indices

The sectoral performance indexes were mixed, after the NGX Insurance  and Banking   index closed lower by 2.35% and 2.28% respectively, amid reports of plans by the fiscal authorities to tax foreign exchange gains of banks to the detriment of investors who already are groaning under the weight of multiple taxes. On the other hand, he NGX Oil/Gas index led the advancers after gaining 0.19%, followed by Consumer and Industrial goods with 0.07% and 0.01% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 29:24, while transactions in volume and value were down after investors exchanged 392.80m shares worth N8.33bn. Volume was driven by trades in GTCO, Veritas Kapital, FCMB, UBA and Cutix.

United Capital and Oando were the best performing stocks, gaining 9.92% and 9.76% respectively, closing at N39.90 and N18.55 per share respectively on the back of the news of juicy interim dividend proposed by the board, and sentiment respectively. On the flip side, Linkage Assurance and Veritas Kapital lost 10% each, closing at N0.90 and N1.08 per share, purely on profit taking.

 Market Outlook

We expect mixed sentiments and sector rotation to continue ahead of next week’s policy meeting outcome and interim dividend expectation on persisting low valuation. Portfolios repositioning is however continuing, as investors take advantage of pullbacks to buy into value.

This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, 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

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

08028164085