Trading activities on the Nigerian Exchange opened for the week on a negative note, thereby extending its bearishness for five straight days, after the benchmark NGX All-Share Index closed sharply lower, as prices of industrial Goods stocks, and blue-chips suffered a decline on a low traded volume and negative market breadth. As a result, major sectorial indexes witnessed negative sentiments and momentum, following profit-taking and cautious trading that persisted on the exchange, while prices continue to correct in reaction to the rate hike by the Central Bank of Nigeria (CBN) at its last Monetary Policy Committee (MPC) meeting held in May.
This is amid concerns over the impending global economic recession, even as all eyes are on the global and even domestic economic data, just as selling sentiments continue across some sectors. Funds are flowing into the fixed income instruments from risk-averse investors, due to the increase in interest rate that followed May inflation rate that hits 17.71%, even as fuel queues are back across the Federal Capital Territory and Lagos, thereby threatening a further leap in inflation rate.
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 market correction, following and trading price actions simply means that the market tells you what to do, and not the other way round, 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 recently in the international market, but rebounded slightly to trade at $115.10 per barrel, after touching a month high of $126.98 on the reopening of China provinces locked down due to Covid 19, amidst Saudi Arabia’s July futures price rise, even as long as the ongoing Russia-Ukraine war persists. Also, the EU plans to enforce the embargo on the importation of Russian oil, even 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 extended its decline phase, trading below the ‘T-Line’ and 20-day moving average, as the market remains relatively strong, despite the negative outing it started last week. The strong support level has been within the 50,000 basis points region, while volatility persists and corrects towards the next breakdown is sported around 50,515.29bps. Should the index break this point, the next visible support is 50,288.35bps.
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.
Meanwhile, Monday’s trading opened slightly on the downside and was sustained for the rest of the session, despite oscillating on profit-taking and selloffs in industrial stocks, a situation that pushed the NGX’s index to an intraday low of 50,750.60bps from its highs of 51,804.21ps before closing below its opening points at 50,756.74bps.
Market technicals were negative and mixed, as volume traded was lower than the previous day in the midst of negative breadth and selling sentiments as revealed by Investdata’s Sentiments Report showing 99% sell position and 1% buy volume. The total transaction volume index stood at 0.57 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking down at 30.05pts, from the previous day’s 35.29pts, indicating that funds left the market.
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Index and Market Caps
The NGXASI, at the end of the day’s trading, shed 1,021.34bps, closing at 50,756.74bps, after opening at 51,778.08bps, representing a 1.97% decline. Similarly, market capitalization fell by N550.60bn, closing at N27.36tr, from the previous day’s N27.91tr, which also represented a 1.97% depreciation in value.
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Monday’s downturn was driven by selloffs and profit-taking in Dangote Cement, Oando, GTCO, FBNH, UBN, Lafarge Africa, Flour Mills, Lafarge Africa, Unilever, AIICO, and NEM among others. This impacted negatively on Year-To-Date gain, dragging it to 18.82%, while market capitalization growth stood at N4.51tr YTD, representing a 22.72% rise over the opening level for the year.
Bearish Sector Indices
Performance indexes across sectors were down, except the NGX Banking that closed higher by 0.35%, while NGX Industrial goods led the decliners after losing 5.27%, followed by Consumer goods, Insurance and Energy with 1.16%, 0.94% and 0.23% respectively.
Market breadth was significantly negative, as losers outnumbered gainers in the ratio of 31:7; just as activities in volume and value terms were up, after players exchanged 345.05m shares worth N3.07bn, with volume driven by trades in FCMB, UBA, Accesscorp, FBNH and Transcorp.
Jaiz Bank and Regency Insurance were the best-performing stocks after gaining 5.32% and 3.70%, while closing at N0.99 and N0.28 per share respectively on market forces. On the flip side, Dangote Cement and UBN lost 10% each, closing at N249.30 and N5.40 per share, on profit taking and selloffs.
We expect a cautious trading to continue, ahead of quarter end window dressing and interim dividend season in Nigeria, while some March year-end audited accounts companies hit the market any moment from now. 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 Q1 corporate earnings release. Analysts are also on the lookout for the inflation report 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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Q3 Investdata Master Class
Theme: Profiting From Asset Pricing In An Uncertain Market, Rising Rates Environment
- The State of the Market & 2022H2 Opportunities: Looking at The Fundamental Mix, Alhaji Kurfi Garba MD/CEO Apt Securities & Funds Ltd
- Power of Price Action in identifying Opportunities in Any Market Cycle, , Mr. Abdul-Rasheed Oshoma Momoh, Head Capital Market at TRW Stockbrokers Ltd
- 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
- Identifying profitable sectors and industries to hedge against inflation & down market
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- Trading companies’ earnings with technical tools for higher returns
- Why all you need to make money in equity trading is price
- The strength of NGX sectorial indexes in picking profitable trades
- 5 Hot Stocks to beat inflation and grow your portfolio
- Taking your trading to next level
- Confidence to trade any market cycle
- Set trading goals that will take processes, not financial goal of doubling money, or earning by 100%
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- Trading your plan as pathway to higher results and stronger bottom-lines
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