Sentiments Stay Mixed, Portfolio Realignment Ahead On Rising TB Yields, Audited Earnings Inflow

Market Update for March 6

 The seemingly positive sentiment and outing on the Nigerian Exchange continued a third consecutive session at the midweek on buying interests in Transcorp Plc and subsidiary companies, especially the newly listed Transcorp Power, Africa Prudential, among others, pushing the benchmark NGX All-Share index higher on an above average traded volume and negative market breadth.

The NGX All-Share index’s action trades slightly below the T-line, trying to breakout the line which is an 8-Day Moving Average, as market recovery persists in the midst of higher yields in the fixed income market and ongoing earnings reporting season which has entered its peak with all eyes on financial services providers especially.  The outcome of midweek’s Treasury Bills’ Primary Market auction may likely trigger another panic selling for portfolio rebalancing. The 364-day yield rose further to 21.49% from last auction rate of 19% in the face of rising inflation and FX challenges.

The nation’s economic reality  continues to reflect on corporate and economic numbers in recent time as 2023 audited financials released so far remain mixed and weak, especially among manufacturing companies to reveal the impact of government policies on the  economy as headwinds persisted. This arises from foreign exchange hiccups which is putting pressure on companies operations and performance which had led to many reporting negative earnings, leaving zero reward for their shareholders.

The NGX continues to receive more notifications for board meetings to approve 2023 audited financials from NCR and others, while Cornerstone Insurance and Prestige Assurance informed the market of late submission of 2023 reports.  Also, during the session, Insider dealings update was provided to the market from Cutix and Transpower just as Airtel Africa announced the successful repurchase of 315,000 units of its shares on the Landon Stock exchange at a volume weighted average price of GBP96.73 each. This is happen five days after it commenced the first phase of its share buyback to reduce the company’s outstanding number of shares.

The change in trend and weak momentum persists with the index trading slightly below the T-Line to gather more strength and surpass the support level that turned resistance as the index’s action remain on the decline phase. The current state of market creates buy opportunities for position traders ahead of the release of more audited accounts. Market players should watch out for the value areas of resistance and support levels, as more earnings hit the market. The index’s action has displayed a mixed picture as all eyes are on companies’ earnings, following the optimism fueled by the belief that the impressive performance from the financial sector among others may impact the market positively.

Midweek’s candlestick pattern and formation revealed reversal underway which still requires confirmation as trading opens this morning at the NGX.  Therefore, investors should 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 index’s action is still relatively strong with RSI and bottom chart pattern that signaled possible reversal.

The momentum indicators signals a weakness in the market, as the ADX continues to look down at 33.51, while RSI and Money Flow Index turn up  to read 52.59 and 36.17 points against the previous session 51.20 and 34.58 points respectively.  As money flow index signal bullish divergence with the index action at the end of midweek trading, which traders should, also watch and trade with caution because funds are in the market is still weak. As trading volume pattern suggests hold and watch disposition of market players, as traders continue to reduce their position in some sectors in the face of others investment windows returns remain below inflation and deprecating naira.

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 price at the midweek continue its oscillation, as it trades at $82.96 per barrel in the midst of concerns regarding china economic growth outlook and Fed rate cut.  US increasing inventories and shaking global demand  in the face of  Middle East conflict and that of Ukraine and Russia war.  The rising geopolitical tension across the globe is also a major threat to many economies and the commodity market. Also, OPEC left production cuts unchanged and other factors that impact oil price as it continued to oscillate. This trend may likely continue in 2024, this up and down movement that drive volatility.

Midweek’s trading opened in the upside and was sustained for the rest of the session as investors and traders took position, selling off low, medium and large cap stocks. This pushed the NGX’s index to an intraday high of 99,653.22bps from its lows of 99,033.51bps, before closing above its opening figure at 99,591.64bps.

Market technicals for the session were weak and mixed, as volume was higher 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 90% buy position and 10% sell volume. The total transaction volume index stood at 0.93 points, just as impetus behind the day’s performance was relatively weak as Money Flow Index turned up at 36.17pts, from the previous day’s 34.58pts, indicating that funds entered  the market.

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 Index and Market Caps

The composite  NGXASI gained  401.18 basis points, closing at 99,591.64bps after opening at 99,190.46bps, representing a 0.40% up, just as market capitalization rose by N226.83, closing at N56.31tr from the previous day’s N56.08tr, which also represented a 0.40% 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 overbought range has just increased to 60 as they rallied to new highs that 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.

The upturn was driven by buying interests in Transcorp Plc, Transcorp Power, Africa Prudential, FBNH, Fidelity Bank, SterlingNG and C/I Leasing among others, which impacted mildly on Year-To-Date gain which inched up to 33.19%. Market capitalization YTD gain stood at N14.42 trillion, representing 37.66% above its opening level for the year.


Bearish Sector Indices

The sectoral performance indexes were down save for NGX Banking that closed higher by 0.24%, while NGX  Consumer goods   led the decliners after losing 0.83% followed by Insurance  with 0.15%.

Market breadth was negative as losers outnumbered gainers in the ratio of 29:19, while activities in volume and value were mixed after investors exchanged 416.48m shares worth N19.57bn. Volume was driven by trades in,  Transcorp,  FBNH, GTCO, Transpower  and UBA.

Transpower and Transcorp Plc were the best performing stocks, gaining 9.99% and 9.96%, closing at N319.40 and N18.99 per share respectively on market forces and sentiment. On the flip side, Ikeja Hotel and Tantalizer lost 10% each, closing at N6.75 and N0.36per share, purely on selloffs.

Market Outlook

We expect a continuation of the mixed sentiments as investors and traders digest the latest developments at the fixed income market, with TB’s yield at 21.5%, just as more corporate earnings with dividend  are expected to hits the market and investors  take advantage of low valuation 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.

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