Market Update for June 29
At the midweek, the nation’s stock market witnessed mixed session to close flat on a very high traded volume ahead of the quarter-end window dressing and Q2 earnings reporting season, just as the key performance NGX All-Share Index closed slightly lower, thereby extending the distribution phase of the market for two trading session. The flat position followed improved buying interests in insurance, energy and consumer goods stocks, in the midst buying sentiment and positive market breadth as bargain hunters continued with their positioning and profit taking across major sectorial indexes except for banking.
This is amid concerns over the impending global economic recession, just as selling sentiments resurfaced across some sectors. Funds are flowing into fixed income instruments from risk-averse investors, due to the increase in the interest rate that followed the May inflation rate of 17.71%, even as fuel queues are still spreading across the Federal Capital Territory and Lagos, thereby threatening a further leap in the inflation rate. However, the equity market looks forward to the half-year corporate earnings of listed companies.
To avoid the old mistakes and costly losses of the past in this changing market momentum, we invite you to attend the Investdata Q3 Master Class, ahead of the half-year earnings reporting season and general elections. We note that the major political parties just concluded their primaries to select presidential candidates ahead of the February 2023 general election. Current developments in the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, while actively buying more, as seen in the recent market corrections. Despite the selling sentiment witnessed at the close of trading, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
In the ongoing window dressing by fund managers, the price actions simply mean that the market tells you what to do, and not the other way around, because the price is always right and does not care whatever a trader feels. Bull markets can go on for days, weeks, months, and years, but bear markets happen unexpectedly and can quickly destroy a trader’s profits, or even trading account if a stop loss is not in use.
Oil prices pulled back slightly after rebounding in recent time in the international market to trade at $115.90 per barrel, after American Petroleum Institute reported a large crude draw, even amidst fear that oil markets could face a doomsday scenario this week or beyond, if OPEC has enough capacity to avoid supply problem as long as the ongoing Russia-Ukraine war persists. Also, G7 plans to cap price Russian oil, as these chronic high energy prices are killing the global economy, heightening inflationary pressures across the globe on a weak economic outlook, thereby influencing monetary policies of central banks as they move to checkmate the impacts of the Russia-Ukraine conflict on the global economy to avoid economic recession. The nation’s soaring inflation is a potent threat to the fixed income market and investment yields, which should be an indication that there will be a reversal of funds flowing back to equity space in no distance time as institutional investors balance their portfolios.
Technically, the NGX index action has confirmed distribution phase of the market, trading above the ‘T-Line’ and 50-day moving average, as the market remains strong, despite yesterday flat position. The strong support level has been within the 51,703 basis points region, while volatility persists and corrects towards the next breakdown is sported around 51,618.29bps. Should the index break this point, the next visible support is 51,580.35bps.
The possibility of the trend being sustained is high, and a function of market forces and improved economic conditions during this month and beyond, following which we advise investors to play defensive stocks and reduce investment risks around the market.
Midweek’s trading started slightly on the downside and was sustained for the rest of the session, despite oscillating on position-taking and selloffs in banking stocks, a situation that pushed the NGX’s index to an intraday low of 51,789.90bps from its highs of 51,810.45ps before closing below its opening points at 51,802.48bps.
Market technicals were positive and mixed, as volume traded was higher than the previous day in the midst of breadth favoring bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 39% sell position and 61% buy volume. The total transaction volume index stood at 1.34 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking down at 24.72pts, from the previous day’s 33.51pts, indicating that funds left the market.
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Index and Market Caps
At the end of the day’s trading, benchmark NGX All Share index slide by 1.50bps, closing at 51,802.46bps, after opening at 51,803.98bps, representing a 0.001% drop. Similarly, market capitalization fell by N81m, closing at N27.93tr, from the previous day’s N27.93tr, which also represented a 0.001% value loss.
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Meanwhile, Wednesday downturn was driven by profit-taking in University Press, PZ, GTCO, United Capital, Ecobank Transnational Incorporated, Cutix and Trancorp Plc among others. This impacted negatively on Year-To-Date gain, dragging it to 21.27%, while market capitalization growth stood at N5.41tr YTD, representing a 24.72% rise over the opening level for the year.
Bullish Sector Indices
Performance indexes across sectors were up, except the NGX Banking that closed 0.07% lower, while the NGX Insurance led the advancers after gaining 0.46%, followed by Consumer goods and energy with 0.09% and 0.07% respectively. while industrial goods were flat.
Market breadth was positive, as gainers outnumbered losers in the ratio of 17:14; just as activities in volume and value terms were mixed, after players exchanged 416.47m shares worth N3.46bn, with volume driven by trades in Mutual Benefits Assurance, GTCO, UBA, FBNH and Accesscorp.
Ikeja Hotel and Royal Exchange Assurance were the best-performing stocks after gaining 10% and 7.29%, while closing at N1.21 and N1.03 per share respectively on market forces. On the flip side, University Press and NGXGROUP lost 9.72% and 6.71% respectively, closing at N2.60 and N22.95 per share, on profit taking.
We expect cautious trading as bargain hunting continue, ahead of quarter end portfolio rebalancing and interim dividend season in second half, while some March year-end audited accounts companies hit the market any moment before June 30, 2022. We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists and players digest the macro-economic data and Q4 unaudited earnings released so far. Analysts are also on the lookout for the inflation rate of 17.71% to support recovery in the new month amid oil prices oscillation. Also, the market continues to interpret the rising inflation in relation to the crude oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend-paying stocks in the hope of dividend announcements.
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Theme: Profiting From Asset Pricing In An Uncertain Market, Rising Rates Environment
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- State of the Economy & Impact Doubling on Company Earnings in Negative Real Rate Of Return Environment. , Mr. Ambrose Omordion, Chief Research Officer, Investdata Consulting Ltd
Takeaway from the master class
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