Consolidation, Positive Sentiments May Linger, On Bargain Hunting, Positioning In Q1 Earnings Inflow

Market Update for April 25
Trading on the Nigerian Exchange stayed upbeat after the long holidays, opening the week on a bullish note, as the benchmark NGX All-Share index closed higher on increased buying activity across some major sectors of the market ahead of more Q1 numbers. We noted that the corporate earnings released so far beat market expectation, despite the nation economic activities witnessing contraction in the month of February and March as a result of cash crunch.
The return of liquidity in the financial markets due to maturity of the April bond maturity and dividend payments, which has supported the buying sentiment in the equity space as players reinvest such funds in the market. The nation continues another season of transition of government to a new administration amidst the increasing geopolitical tensions across the globe.
Also, there is the prevailing low prices of many stocks in the market due to price adjustments which has made many companies attractive for new entry and repositioning of portfolios in the midst of high inflation and contracting economic activities as result of high cost of funds that are impacting negatively on the general economy.
This consolidation phase of the market could be sustained on the strength of Q1 earnings reports which had been impressive if the selling sentiment among the highly priced stocks moderates and liquidity entering the market remain on the rise as more and more companies hold their AGM for shareholders to approve payment.
The benchmark NGX index closed higher, extending its recovery for the fourth consecutive session on a huge traded volume and positive market breadth amidst strong momentum and buying interest in pending 2022 audited financials and Q1 2023 earnings reports, as more companies are notifying the NGX of their board meetings and approval of Q1 financials. During and after the trading session, Livestock Feeds and Skyway Aviation made available their first quarter earnings reports to the market which came impressive to start the new financial year.
The market has rebounded from its oversold state as the All-Share index trade flat on the T line, ahead of it 20-Day simple moving average and EMA that support uptrend pattern for technical traders and discerning investors. This, however, requires confirmation before investors can jump into any position, especially as stocks have rebounded on the back of their prevailing undervalued state. Q1 numbers are likely to come predominantly mixed, due to the low economic activities during the period as a result of to cash crunch.
The prevailing dividend yields and low market price to earnings ratio provides better opportunities for discerning investors to hedge against inflation even when fixed income market yields look attractive. There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as a policy shift may be a plus for equities on a likely financial market and economic reset. Market volatility remains at the extreme on positive sentiment as T-line is par with index action ahead of the next market forces.
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Oil price oscillation continued, as it slides to trade at $81.37 per barrel in the midst of large crude draw and expected increase in china demand ahead of May holiday. As fear of western central banks hiking rates in May, even when their economies are contracting in the face Ukraine attack and rising geopolitical tension across the globe, the prevailing high interest rate regime and soaring inflation, despite slowing down across the globe remain potent threat to world economy. Also, supply tightened due to the Russia-Ukraine war that entered the second year. The up and down movement of oil price also continues to drive volatility across markets.
Tuesday’s trading started in the upside and it was sustained throughout the session on buying interests among the mid cap, blue chip companies and highly priced stocks, a situation that pushed the NGXASI to intraday high of 51,681.55 basis points from its lows of 51, 407.96ps, before closing above its opening figure at 51,681.01bps.
Market technicals were positive and strong with higher volume traded, when compared to the previous session in the midst of breadth favoring the bulls on buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 2.42 points, just as impetus behind the day’s performance was weak going by Money Flow Index at 32.79pts, from the previous day’s 37.18pts, indicating that funds left the market, despite closing higher.
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Index and Market Caps
At the end of Tuesday’s trading, the composite NGXASI gained 325.27 basis points, closing at 51,606.49bps from the 51,355.74bps it opened, representing a 0.50% growth, just as market capitalization rose by N136.54bn to close at N28.10tr, from the previous day’s N27.96tr, which also represented a 0.50% value gain.
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Meanwhile, Tuesday’s upturn was driven by position taking in the shares of MTNN, Wapco, Stanbic IBTC, Berger Paints, Transcorp, Accesscorp, Unilever, Sterling Bank, NEM Insurance and Dangote Sugar among others, which impacted positively on Year-To-Date gain to 0.69%. Market capitalization YTD loss stood at N78 billion, representing 0.66% below its opening level for the year.

Mixed Sector Indices
Sectorial performance indexes were mixed, as the NGX Consumer goods and Oil/Gas closed lover by 0.37% and 0.07% respectively, while NGX Banking led the advancers after gaining 1.33%, followed by Industrial goods and Insurance with 0.11% and 0.07% respectively.
Market breadth turned positive, as gainers outpaced losers in the ratio of 33:9, while activities in volume and value were up after investors exchanged 2.09 billion shares worth N8.85bn, with volume driven by trades in Transcorp, Accesscorp, Fidelity Bank, Zenith Bank and UBA.
Japaul Gold and Honeywell were the best performing stocks for the day after gaining 10% and 9.91% respectively, closing at N0.33 and N2.55per share respectively, on market sentiment and expected unaudited Q4 numbers. On the flip side, Coronation Insurance and NGXGroup lost 7.32% and 4.89% respectively, closing at N0.38 and N25.30per share, purely on profit taking.

Market Outlook
We expect the consolidation phase and positive sentiments to continue as bargain hunting and positioning hit the market on low new attractive price levels, ahead of more Q1 earnings expectation in the midst of price adjustment for dividend and digesting of Q1 numbers so far. We note that income investors continue to target dividend paying and defensive stocks to protect their portfolios post-dividend adjustments. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

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