Market Update for June 9
Thursday’s trading on the Nigerian Exchange witnessed a moderated profit-booking, which extended the negative outing for a second consecutive session on a less than average volume, but negative market breadth. Consequently, the benchmark NGX All-Share Index closed marginally lower, side-trending on selling sentiments as momentum remained mixed ahead of the consumer price index report expected next week.
The pullback confirmed continued profit taking and reactions to the recent rate hike by the Central Bank of Nigeria (CBN) at its Monetary Policy Committee meeting in May, amid concerns over the impending global economic recession. Also, all eyes are on global and domestic economic data, while selling sentiments continue across some sectors, as funds flow into fixed income instruments from risk-averse investors due to the increase in interest rate that followed the expected May inflation reports from the National Bureau of Statistics (NBS).
To avoid the old mistake 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 Wednesday’s trading, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
In the ongoing market reversal, 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 as it 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 dipped slightly in the international market, while oscillating and trading at $121.50 per barrel, after touching a two-month high of $123.80 on the reopening of China provinces locked down due to Covid 19, amidst Saudi Arabia’s July futures price rise, even as the news of US president’s visit to that country is not likely to solve the oil market problems or crash prices, for 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 entered another distribution phase, trading slightly above the ‘T-Line’ and the 20-day moving average, as the market remains strong, despite the mixed trend that started the week. The strong support level has been within the 53,000 basis points region, while volatility persists and corrects towards the next breakdown sported around 53,100.01bps. Should the index break this point, the next visible support is 53,012.43bps.
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, Thursday’s trading started slightly on the downside and was sustained for the rest of the session, despite oscillating on ‘buy’ interest and selloffs in banking stocks, a situation that pushed the NGX’s index to an intraday low of 53,166.01bps from its highs of 53,206.08ps before closing marginally below its opening points at 53,170.73bps.
Market technicals were negative and mixed, as volume traded was higher than the previous day in the midst of negative breadth and sentiments as revealed by Investdata’s Sentiments Report showing a 88% sell position and 12% buy volume. The total transaction volume index stood at 0.81 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking down at 40.70pts, from the previous day’s 48.63pts, indicating that funds left the market.
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Index and Market Caps
At the end of Thursday trading, the composite index NGXASI slide by 23.25bps, closing at 53,170,73bps, after opening at 53,193.98bps, representing a 0.04% drop. Similarly, market capitalization fell by N12.53bn, closing at N28.66tr, from the previous day’s N28.68tr, which also represented a 0.04% value loss.
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Thursday downturn was driven by selloffs and profit-taking in Nigerian Breweries, GTCO, Zenith Bank, GSK, ETI, UACN, C & I Leasing, Champion, NEM, and Accesscorp, among others. This impacted mildly on Year-To-Date gain, which to 24.49%, market capitalization growth stood at N6.53tr YTD, representing a 28.49% rise over the opening level for the year.
Bullish Sector Indices
Performance indexes across sectors were in green, except for the NGX Banking index that closed lower with 1.20%, while the Insurance led advancers after gaining 1.47%%, followed by Energy, Consumer and Industrial goods with 0.46%, 0.13% and 0.13% respectively.
Market breadth was negative, as losers outnumbered gainers in the ratio of 17:15; just as activities in volume and value terms were up, after players exchanged 218.42m shares worth N3.34bn, with volume driven by trades in Transcorp, GTCO, UBA, FBNH and Zenith Bank,
University Press and Cornerstone Insurance were the best-performing stocks after gaining 9.4% and 8.9%, while closing at N2.90 and N0.61 per share respectively on dividend expectation and market forces. On the flip side, C & I Leasing and FTN Cocoa lost 8.6% and 8.3% respectively, closing at N3.20 and N0.33 per share, on selloffs.
Being the last trading session for the week we expect a mixed trend after the recent bargain hunting that pushed the market up amid the continued portfolio repositioning ahead of May inflation report and the interim dividend season, while audited accounts of March year-end companies begin to hit the market soon. 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 May consumer price index 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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