Expect Bull Trend Yet On Reactions To Q1 Earnings Inflow, Q1 GDP, Raging Inflation

Market Update for the Week Ended May 3 and Outlook for May 6-10

Trading on the Nigerian Exchange started the month of May on a positive, with the benchmark NGX All-Share index closing higher for the week, halting six consecutive weeks of bear transition in the midst of rekindled buying interests, mixed corporate earnings and portfolio rebalancing. This is happening at a time the dividend qualification and payment dates of some quoted companies are providing the needed liquidity for the market as revealed by the Money Flow Index on the daily and weekly time frame.

The seeming changes and improving market fundamentals, the earnings released so far, as well as mixed macroeconomic data and unfolding market dynamics are offering market players insights into what tp expectfrom different sectors of NGX. The numbers reveal the strength and upside potentials of service providers such as banks, insurance, and others in the aviation industry, healthcare, energy, agribusiness and others. Despite the rising economic headwinds as being witnessed today, an international rating agency, Fitch has upgraded Nigeria’s economy from stable to positive. This is linked to the ongoing economic reforms of the government and relatively stable foreign exchange market, thereby boosting confidence among local investors, and attracting foreign inflow in the face of the oversold market and low valuation.

The benchmark index resisted further decline, signaling uptrend after forming a bullish engulfing candlestick on a weekly chart. Market participants are fashioning strategies to navigate this volatile market through  portfolio diversification to hedging strategies, sector rotation. This is just as traders are exploring avenues to mitigate the impact of higher yields in the alternative investment window. At the current market condition, investors and traders should stay tuned to market dynamics and embrace a diversified approach, even as players can weather the correction and seize opportunities amid the rebound.

According to the April Purchasing Managers’ Index report from Stanbic IBTC, Nigeria’s private sector and business activities improved slightly in the face of rising inflationary pressure and improvement in the strength of the Naira over the past month. Although price increases were less pronounced than in March, the extent of inflationary forces continued to limit rates in output and new orders in the month of April, both of which were unchanged from the previous month.

Technically, the market has rebounded on daily chart and signaling b reversal chart pattern on a weekly time frame, as sentiment report for the period revealed buying pressure of 100% and MFI reads 46.30 points looking down on a weekly chart. Trading above the T line on a daily chart to indicates return of strength but below T line on a weekly time frame to reflect weak momentum. The positive outing  and market internal for the period occurred in the midst of buying interest and position taking in dividend paying stocks by investors  and bargain hunters  took advantage of pullbacks to buy into fundamentally sound  companies with high yield, strong earnings power and  low valuation. We note that the ongoing government reforms are yet to put the economy on the path of recovery, or progress due to the continued mismatch of policies, and even somersault altogether in some cases.

The global stock markets witnessed a mixed performance on impressive corporate earnings, outcome of fed meeting and softer than expected labour report that  pushed MSCI world index higher to gain 0.8% for the week. Even as the increasing geopolitical tensions are already threatening many economies, as commodities prices continued to look up.  In the new week, the expected statements from federal reserve officials on jobs growth that moderated last month and outcome of policy meeting of bank of England and reserve bank of Australia  to shape the market, as ceasefire in the middle east crisis.

To navigate the rest of Q2 market volatility and its mixed outlook profitably using fundamental and technical analyses to run, join Investdata’s Live Sessions at noon every Mondays, Wednesdays and Fridays, also get investdata Technical Toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent corrections and pullbacks to continue the markdown phase. As volume of transaction witnessed within the week remain low, it is time to go shopping for undervalued stocks, sector rotation and the next insider dealing opportunity.

Oil price during week oscillated to recorded weekly loss, as it trade at $82.96per barrel following the mixed macroeconomic data from US  in the midst of easing  middle east conflict. As rising geopolitical tensions threats supply, coupled with war in Ukraine and Russia disrupting  in oil output in the face of osculating price. The up and down movement of oil price has continues to drive volatility across different investment windows and inflation again.

Movement Of NGXASI

The NGX recorded a bullish performance in the week under review, as the composite NGX All-Share index inched up in three sessions and was down in one day, as  the buying interest in the face of mixed earnings and reaction to some positive companies scorecard. The latest   Q1 numbers are: Zenith Bank, GTCO, UBA, Accesscorp, Nahco, Cadbury , Wema Bank, FCMB and others.  Presco and FCMB made available their full year audited accounts for 2023 to the market, and the numbers were impressive based on their top and bottom line growth. Their earnings power supported a dividend of N24.30 and 50 kobo respectively.

The week’s trading  opened marginally on negative outing,halting  previous gains with the index losing   0.28% on Monday, this trend was short lived on Tuesday as the market close higher by 0.35% in position taking in banking stocks, while midweek was public holiday to celebrate international workers. The index on Thursday was up by   0.35%, while  Friday witnessed more buying interest across major sectors of the market to close by 0.85% up.  This brought the week’s  total  gain  to 1.46%, against the previous week’s 1.39% red position.

Consequently, NGX All-Share Index gained 1,434.34bps, closing at 99,587.25bps, from previous week’s 98,152.91bps closing level, after touching an intra-week high of 99,595.83bps from a lows of 97,734.56bps. Market capitalisation also rose by  N811 billion to N56.32 tr, representing a 1.46% value gain. Despite price adjustment in the shares of Seplat, GTCO, Fidelity Bank, Meyer and Unilever for dividends of N78.60, N2.70, 60 kobo, 30 kobo and 75 kobo respectively.

The top advancers’ table  for the week was dominated by medium and low cap stocks in the midst of position taking and accumulation, as more stocks appreciated in value during the period. Also notable was the fact that market players are still trading with caution, even when taking position and carrying out sector rotation  ahead of more earnings reports and unfolding events in the government reform process.

Market technicals for the period were positive and strong  as gainers   outnumbered losers  in the ratio of 42:36 on a buying pressure  as revealed by investdata sentiment report showing  100% ‘buy’ volume and 0% sell position. Money Flow Index was looking down at 46.30 points  from the previous week’s 48.19 points, an indication that funds left the market on a weekly time frame, despite closing higher for the period.

Technical View

The NGX index’s action formed a reversal bullish engulfing candlestick and double bottom chart pattern that signaled uptrend underway, which needs to be confirmed in the new week, as more financial reports flow into the market to change momentum and sentiment, especially from the insurance companies and march year end accounts. The buying  sentiment for the period in the face of low valuation and mixed corporate earnings, even when higher yields in the alternative market still remain below inflation rate.

Already, the index  has entered a markup phase on a daily chart. We note that the 94,538.12bps is a strong support level on the daily and weekly time frame, even as the index on the weekly time frame is  resisting decline. The market is at a critical zone as all eyes are on the more financials  to support market fundamentals and attract inflow again. Also, we note that investors are taking long-term positions in the face of dividend expectations and volatility.

We also note that buyers are in control, as revealed by the  buying sentiment and positive market breadth, as the index is trading below the T line and  above 50-Day Moving Average on the weekly chart.

Mixed Sectoral Indices

The sectoral indexes of the week were mixed as the NGX Banking and Insurance closed 9.42 and 0.98% higher respectively, while the NGX Oil/Gas  index  led the decliners after losing  0.68%, followed by Industrial and Consumer Goods  with  0.36%  and 0.26% respectively.

Activities  in volume and value were mixed  as players exchanged 1.94bn shares worth N32.64bn, compared to previous week’s 1.84bn units valued at N34.26bn. Volume was driven by Financial Services, Consumer goods and Conglomerates industry,  boosted specifically by  Abbey Mortgage Bank, GTCO, Accesscorp, Zenith Bank and Transcorp.

FBNH  and SterlingNG were the best performing stocks for the week, after gaining 32.68% and  27.75% respectively, closing at N27.00 and N4.88 per share on market forces and  sentiment. On the flip side, Nascon  and University Press  lost 17.03% and 16.67% respectively, at N43.60 and N2.05per share, on profit taking and selloffs.

Outlook for the week

We expect the mixed sentiment and bullish trend to continue, as investors react to Q1 numbers in the face of portfolio rebalancing and expected earnings reports and Q1 GDP, despite the rising inflation. Bargain hunters are also expected to take advantage of rebound to buy into dividend stocks. As investors are watching with rapt attention.

However, retracement to the 94,000bps level and below is possible on correction as global and domestic events unfold.


Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605