Consumer Goods, Commodities Stocks Drive Latest Uptrend On NGX

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It is no news that the Consumer Goods sector, as well as Commodities stocks on the Nigerian Exchange went out of favour before now due to the ongoing economic reforms of Bola Ahmed Tinubu administration since coming on board on May 29, 2023. The government had in its maiden pronouncement removed the much dreaded fuel subsidy without a second thought, just as it began a unification of exchange rate in the country, a situation that threw the heart beat of the economy- the manufacturing sector into a gale of foreign exchange losses. This set the companies into panic mode as it negatively three their shareholders’ funds and retained earnings into negative territories. Most impacted were those companies with loans denominated in foreign currencies that had to absorb the huge loses, in additon to others with imported raw materials.

We break down why consumer goods and others in agribusiness might finally be ready to participate and maybe continue to lead the bull, despite the string of profit taking. The fresh relative strength scan, and price action of many companies in these sectors reveal their high upside potentials. There are plenty names quietly pressing higher with clean, bullish setups. One of thing we love most about bull markets is how they try to include everyone, whether growth, or value stocks. It’s all working and we’re all happy. The Nigerian market is becoming interesting and better, if you can only get the real picture and the dynamics of stock markets. This is because most risk assets participate in bull markets, and even the bad ones join the bull rally eventually.

And of course, we can always find bad stocks that are bucking the trend and falling, but I’m talking about subgroups and thematics. Most areas end up working. At the end of a sustained bull market, the list of those that didn’t go up will be very short. It’s a hallmark characteristic of the good times.

The leaders pull the laggards higher, while the worst ones end up looking more like the best. And not the other way around. This is often referred to as sector rotation. But it’s really just an expansion in participation when it occurs over longer time-frames.

Eventually, the same government policy that dragged the sector and industries into red position has triggered the ongoing turnaround in earnings performance now driving the positive sentiment. There is also flow of funds into the sector as revealed by sector indexes and some stocks hitting their all-time high ahead of the half-year earnings season expected in July, as well as the policy meeting of the Central Bank of Nigeria in that same month.

NGX Consumer Goods Index Monthly Chart