Sentiments May Stay Mixed On Bargain Hunting, Profit Taking, As Investors Digest Economic Data

Market Update for the Week Ended August 18 and Outlook for Aug 21-25

Nigeria’s equity market last week witnessed another round of profit taking and selloffs in highly priced stocks, halting four consecutive weeks of positive outing as the NGX All-Share index’s action ranged on a declining volume traded in the midst of price adjustment for full-year and interim dividends of N2.80, 12 Kobo, N5.60 and N22.80 by BUA Cement, Cutix, MTNN and Seplat respectively.
These factors and changing economic fundamentals weighed on the key performance NGX All-Share index to closed lower, as the fiscal and monetary authorities battle to stabilize v olatility in the FX market, helped by last week’s $3bn facility obtained by the Nigerian National Petroleum Company Limited from the African Export Import (Afrexim) Bank as to stabilize the country’s fx challenges. There was also the Central Bank of Nigeria’s readmission of Bureaux De Change operators into the forex market after two year of currency supply cut with new operational procedures that will help to manage the volatile exchange market.
Also, during the week, Nigeria’s minister-designates were assigned portfolios ahead of Monday’s inauguration, a move that is expected to reawake the economy with tailour-made policies, as well as address the insecurity to attract domestic and foreign investments.
Also, market players have continued to rebalance their portfolios on the strength of the recent corporate scorecards and macroeconomic reports, especially as July consumer price index rose to 24.1% the highest in almost a decade, driven by higher prices of food items, increased transportation fares, energy and others. The inflation rate which represents 1.29 percentage points from 22.79% in June. On year on year basis, the headline inflation rate was 4.44% points higher. Furthermore, the CPI rate in July 2023 on a month on month basis was 2.89%, which was 0.76% higher than 2.13% recorded in June 2023. This is an indication that prices of goods and services are still looking northward on average of 0.76% in July.
Selloffs and profit booking continued among consumer discretionary stocks that represent those areas where consumers have option as to whether to buy or not, including autos. Consumer staples, on the other hand, are goods consumers will buy and use regardless of how bad the economy might be, like personal use, energy, foods and others. When stocks in general are under pressure, staples tend to outperform, holding up better than most other stocks, especially consumer discretionary, because consumer discretionary stocks do well when the general market and economy are booming. The unification exchange rate in the FX market had affected thus sector performance as many companies in the consumer goods industry posted a negative earnings that has been the concerns of market players.
The latest mixed corporate earnings in the market are yet to impact much on the prices of most equities due to ongoing profit taking, buying interest and portfolio repositioning as a result of high inflation and interest rates. Institutional investors continue to digest these numbers but are yet to start accumulating position in those companies which scorecards beat expectation as revealed by the prevailing low volume of transactions on NGX recently. Also, the market expects positive news or policies of government to support the sector or the company performance going into the future. Noteworthy also is the fact that some corporate results came below expectation, especially some blue chip companies and medium cap stocks that posted mixed and even disappointing numbers. As such, let your stop-loss and exit strategies guide you at a time like this.
Market technical for the week, as revealed by sentiment of report indicated 32% buy position and money inflow reading 85.39, hence the need for investors to navigate the market now that many stocks are fairly priced in the face of mixed corporate numbers. The market situation of low traded volume and sideways trend in the midst of technical pattern of distribution phase and strong momentum that signal that continuation of trend or reversal, as bargain hunters take advantage of pullbacks and relatively low prices to position in fundamentally sound stocks
The market remains above the 64,000 basis points’ mark , trading above the ‘T line and 50-day moving average on a weekly chart, to attract bargain hunters and institutional investors as sector rotation and portfolio rebalancing increased amidst studying of corporate earnings released so far, as all eyes are on first tier banks results. Also noteworthy is the fact that 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 Q3 and beyond on profit booking and buying interests. Even as meager talks of Nascon, Dangote Sugar and Dangote Rice continue in this new week and others to shape the market for this period.
To navigate the Q3 market volatility and the rest of the year’s mixed outlook profitably using fundamental and technical analyses 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. 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 continued its bull-run, despite oscillating to trade at $84.89 per barrel in the midst of weak macroeconomic indices of China and the fear that it may extend to US. We note the rising geopolitical tensions 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
NGX index action recorded a bearish performance for the week, having four sessions of down market and one day up market as result of buying interest in Dangote Cement, as selling sentiments dominated trading activities to create bargain opportunities in the face of pullbacks and sector rotation. As portfolio repositioning on the strength of global happenings, corporate earnings and mixed macroeconomic data released so far.
The week’s trading started on a negative note, halting gains of the previous session, after losing 0.18%, which was sustained till Thursday shedding 0.17%, 0.47% and 0.27% respectively, before rebounding on Friday with 0.42%. This brought the week’s cumulative loss to 0.93%, compared to the previous week’s 0.20% gain.
Cumulatively, the NGX All-Share index lost 604.28bps, closing at 64,721.09bps from the previous week’s 65,325.37bps, which represents 0.93% decline, after touching an intra-week low of 64,450.40bps from its highs of 65,358.76bps. Similarly, market capitalisation fell by N150bn, also representing a 0.42% value loss, closing at N35.42tr from opened value of N35.57 trillion. The difference between the loss recorded by the index and market cap resulted from bonus shares listed by MTNN during the week.
The week’s top advancers’ table was dominated by low and penny stocks, amidst profit taking, buying position and strong momentum, as volatility continued. Also notable was the selling sentiment, while investors assessed impacts of the changing economic fundamentals. So far, market players are revealing the upside potentials and inherent value in some companies with strong earnings power and volume patterns ahead of more half year earnings reports with interim dividend. So, buying into value, strong earnings and high dividend payout companies remain the way to go, as price correction impacts positively on dividend yields.
The decliners and advancers’ line for the week was negative as losers outpaced gainers in the ratio of 56:29 on mixed sentiments as revealed by investdata sentiment report showing 32% ‘buy’ volume and 68% sell position. Money Flow Index is looking up to read 85.39bps, from the previous week’s 83.12points, an indication that funds entered the market on a weekly chart. The candlestick formation of the market’s index on a weekly time frame revealed a bearish pattern due to profit taking in blue chips companies, and selloffs in highly priced stocks, amidst rising inflation rate and negative returns in the fixed income market. There is also Impacts of the ongoing economic reform of the new government.

NGXASI Weekly Chart
The NGX index’s action on the weekly chart revealed a ranging market on a low traded volume to form a hammer candlestick in uptrend that signaled correction or pullback on a strong momentum and mixed sentiments, as the market remains strong in the midst of increased volatility and profit taking. We note also that the index is trading above ‘T’ line and strong support level of 64,000 points, as NGX trades above the 20- and 50-day moving average. The candlestick formation, at the end of the week, showed sellers are in control, as investors and analysts digest macrocosmic data, financials and other factors to reposition their portfolios for Q3 and beyond. The candlestick pattern indicates continuation of the trend, depending on market forces in the new week.

Mixed Sectoral Indices
Sectoral performance indexes were mixed, as NGX Consumer and Industrial goods closed higher by 2.39% and 0.37% respectively, while the NGX Insurance led the decliners after losing 2.17%, followed by Banking and Energy with 2.06% and 1.13% respectively.
Activities in volume and value were mixed as investors exchanged 1.69bn shares worth N29.41bn, compared to the previous week’s 1.74bn units valued at N25.09bn. Volume was driven by financial services, Conglomerates and Energy stocks. Specifically, volume was boosted by trading in shares of FBNH, Transcorp, Fidelity Bank, UBA and Accesscorp.
CWG and The Initiative were the best-performing stocks, gaining 25.83% and 23.4% respectively, closing at N3.80 and N1.16per share on market sentiment and forces. On the flip side, the share prices of Sunu Assurance and Guinea Insurance lost 28.70% and 25.64% respectively at N0.82 and N0.29 per share, on back of profit taking,

Outlook for the week
We expect the mixed sentiments to continue on bargain hunting and profit taking, as market players digest inflation data ahead of midweek Treasury bill market auction, while all eyes are on first-tier banks corporate earnings in the face of sector rotation and more policy pronouncement. These are coming in the midst of, corporate actions, price adjustment and payment dates. However, retracement to the 62,578.12bps level and below is possible on profit-taking as global and domestic events unfold.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605