Trading activities on the Nigerian Exchange resumed Tuesday, after the Democracy Day holiday declared by the Federal Government, as investors took profit, thereby reversing the previous session’s gains. The composite NGX All Share Index closed lower in the process, extending its sideways movement on a low traded volume and negative market breadth, even as sectorial performance for the day witnessed a mixed sentiment and momentum following the decline suffered by banking and energy stocks on selloffs.
The price correction signaled continuation of 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 about the impending global economic recession. Also, all eyes are on the world and even 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) today.
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 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 rebounded slightly in the international market, while oscillating and trading at $121.90 per barrel, after touching a two-month high of $124.60 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 extended its ranging in distribution phase, trading slightly below the ‘T-Line’ and above 20-day moving average, as the market remains strong, despite the negative outing it 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 is sported around 53,097.71bps. 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, Tuesday’s trading opened 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 53,097.77bps from its highs of 53,202.13ps before closing marginally below its opening points at 53,114.65bps.
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 84% sell position and 16% buy volume. The total transaction volume index stood at 0.79 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking down at 44.39pts, from the previous day’s 40.60pts, indicating that funds entered the market despite closing down.
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Index and Market Caps
The NGXASI at the end of the day trading shed 88.73bps, closing at 53,114,65bps, after opening at 53,201.38bps, representing a 0.16% drop. Similarly, market capitalization fell by N46.76bn, closing at N28.66tr, from the previous day’s N28.68tr, which also represented a 0.16% value loss.
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Tuesday’s downturn was driven by selloffs and profit-taking in CAP, Stanbic IBTC, Oando, GTCO, FBNH, Zenith Bank, Lafarge Africa, ETI, Dangote Sugar, Caverton, Champion, AIICO, and UBA among others. This impacted mildly on Year-To-Date gain, dragging it to 24.34%, while market capitalization growth stood at N6.51tr YTD, representing a 28.29% rise over the opening level for the year.
Mixed Sector Indices
Performance indexes across sectors were mixed, as the NGX Energy, Banking, and Industrial indexes closed 0.47%, 0.35%, and 0.11% lower respectively, while the Insurance gained 0.16%.
Market breadth was negative, as losers outnumbered gainers in the ratio of 25:8; just as activities in volume and value terms were up, after players exchanged 299.99m shares worth N3.10bn, with volume driven by trades in FCMB, UBA, Transcorp, Accesscorp and GTCO.
Learn Africa and SUNU Assurance were the best-performing stocks after gaining 9.7% and 9.4%, while closing at N2.37 and N0.35 per share respectively on dividend expectation and market forces. On the flip side, Chemical Allied Product and Caverton lost 9.9% and 7.8% respectively, closing at N18.15 and N1.06 per share, on selloffs.
We expect a cautious trading as all eyes are on the May consumer price index reports and Fed decision on interest rates, ahead of the 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
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- 5 Hot Stocks to beat inflation and grow your portfolio
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