Seesaw Trend May Linger Amid Profit Taking, Low Valuation, As Investors Await Earnings Season Kickoff

Market Update for July 2

The seesaw movement on the Nigerian Exchange resurfaced Tuesday with the benchmark NGX All Share index rebounding to reverse the previous loss in the midst of selling sentiment and low traded volume ahead of the half-year earnings reporting season in first month of Q3.

Also on Tuesday, Conoil presented its belated 2023 full-year audited report with the directors proposing a dividend of N3.50, as well as its Q1 2024 scorecard showing top and bottom lines growth of 160% and 44% respectively. This translated to earnings per share of N6.26, up from N4.34 in the similar period of 2023.

The oscillation on the exchange is a reflation of the changing market structure and fundamentals, as all eyes are on the early filers like Infinity Trust Mortgage Bank, United Capital, Africa Prudential and others. The rest of the year is expected to 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 draw closer, more companies like BUA Foods, VFD Group, Morison Industries, Transcorp Hotel, 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 Aiico, Ikea Hotel and NEM Insurance, while Airtel Africa updated the market of its ongoing share buyback. Just as The Initiates Pls 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 19.47, while RSI and Money Flow Index were mixed to read 60.19 and 64.75 points against the previous session 59.61 and 64.82points 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 end of the quarter window dressing.

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Oil price on Tuesday closed lower, continuing its oscillation to trade at $86.65 per barrel in the midst of bigger than expected draw from US 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.

Tuesday’s trading opened slightly in the green and it was sustained throughout the session, despite oscillating  on positioning and profit taking across some major sectors, a situation that pushed the NGX’s index to an intra-day high of 100,171.0bps from its lows of 100,012.10bps, before closing marginally above its opening level at 100,067.80bps.

Market technicals for the session were weak and mixed with higher volume when compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 35% buy position and 65% sell volume. The total transaction volume index stood at 0.72 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index  slide to read 64.75pts, from the previous day’s 64.82pts, indicating that funds left the market, despite closing in marginal green.

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Index and Market Caps

The NGX All-Share Index inched up by 46.94 basis points to close at 100,067.77bps after opening at 100,020.83bps, representing a 0.05% up. Market capitalization rose by N25.72bn, closing at N56.61tr from the previous day’s N56.58tr, which also represented a 0.05% 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.

Meanwhile, the session was driven by position taking in the shares of Accesscorp, Zenith Bank, UBA, GTCO, Cornerstone and Wapic among others. AccessCorp, on Tuesday unveiled its rights issue of 17,772,612,881 ordinary shares of 50 kobo each at N19.75 each.  The day’s gains impacted mildly on Year-To-Date growth which rose to 33.83%, while Market capitalization YTD gain stood at N11.57tr, representing 38.34% above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX Insurance and Banking index closed higher by 1.91% and 1.09% respectively, while NGX Consumer goods index led the decliners after losing 0.34%, followed by Energy and Industrial goods with 0.03% and 0.01% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 24:22, while activities in volume and value were up after players exchanged 365.64 million shares worth N4.12bn. Volume was driven by trades in Universal Insurance, AIICO, UBA, Ucap and NEM Insurance.

Cornerstone Insurance and Jaiz Bank were the best performing stocks, gaining 10% and 9.95% respectively, closing at N2.09 and N2.21 per share respectively on dividend news of 16 kobo and sentiment. On the flip side, RT Briscoe and Cutix  lost 9.86% and 6.82% respectively, closing at N0.64 and N4.10 per share, purely on profit taking.

Market Outlook

We expect seesaw trend to continue until earnings season kickoff 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