Expect Mixed Sentiments Yet, As Investors React To Inflation Data, As Dividend Payout Support Buying Interest

Market Update for May 15
The benchmark NGX All-Share index closed Monday’s trading slightly higher on a mixed sentiment, opening the week’s trading on a positive outing, thereby extending the previous session’s gain on increased buying interests in some blue-chips and undervalued stocks that are recently low in price as a result of markdown for dividends, profit taking, but a strong growth potential in their earnings expected to support price and payout.
The nation’s consumer price index increased for the fourth consecutive month in April 2023, rising by 0.18% to 22.22% year-over-year (vs. 22.04% in March 2023), according to the latest data from the Nigerian Bureau of Statistics. Food and non-alcoholic beverages made up 11.51% of the divisional level items that contributed to the increased inflation, followed by housing, water, electricity, gas, and other fuel (3.72%), clothing and footwear (1.70%), transportation (1.45%), furnishings, household equipment, and maintenance (1.12%), education (0.88%), health (0.67%), other goods & services (0.37%), restaurants & hotels (0.27%), alcoholic beverages, tobacco, and kola (0.24%), and leisure & culture (0.15%). The headline inflation rate also climbed month-on-month by 0.05% to 1.91% (from 1.86% in March).
This trend is likely to continue as the hike in rate has not done anything to impede the inflationary trend, as factors driving prices of goods and service northward remain unresolved or checked. These include foreign exchange volatility, insecurity in food producing areas, poor storage and transport facilities for agricultural produce, which had persisted over time, thereby pushing headline inflation above current levels month-on-month. This situation is expected to continue in May 2023.
As market players digest the inflation data, which is soon to be joined by the Q1 GDP report and outcome of this month’s Monetary Policy Committee meeting, investors are also conscious of the fact that there are less than 14 days to the inauguration of the new administration which is believed to be pro-market and economy, while driving development to enhance the living standard of Nigerians. These factors are likely to impact the market and drive positive sentiment on the back of policy statements and appointment of economic managers to support the renewed hope.
Positive sentiments and accumulation in blue chip companies impacted the market in the face of mixed session and profit taking. Candlestick formation at the end of the day trading revealed a ranging market that support reversal or continuation of trend that need to be confirm today as the market opens, as the market looks to March year-end companies audited financials.
Meanwhile, the current phase of the market calls for caution while at the same time looking at fundamentally sound stocks and the future growth prospects, considering the various sectors and current prices. The prevailing low prices of many stocks due to their recent adjustments for dividend that has made them attractive for new entry and repositioning of portfolios in the midst of high inflation and improving economic activities despite the high cost of funds.
The mixed sentiments on the exchange was driven by buy and sell interests in blue chip companies, especially banking stocks and others, even as the 20-Day Simple Moving Average remains a strong support level on the daily chart. This should guide technical traders and discerning investors, based on the dividend yields and low market Price to Earnings Ratio that provides better opportunity for investors to hedge against inflation even when fixed income market yields look attractive and remain mixed.
Also, there is the uncertainty of a rate crash as the incoming government moves to drive economic growth and development, even as we note the suspension of the planned removal of fuel subsidy and postponement of the population census, signaling the possibility of a policy shift. These may be a plus for the equity market on a likely financial market and economic reset. Market volatility remains at the extreme on positive sentiment as T-line turned support for index action ahead of the next market forces and positive statement.
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Oil price oscillation continued, trading at $75.20 per barrel in the midst negative sentiment and mixed China economic recovery reports in the face of central banks rates hike that is driving economic contraction in the face Ukraine attack. This is in addition to 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. This up and down movement in oil price, has continued to drive volatility across markets.
Monday’s trading started slightly on the upside, and was sustained despite oscillating for the rest of the session, in the midst of profit taking and buying interests in consumer and industrial goods stocks, a situation that pushed the NGXASI to an intraday high of 52,250.73 basis points from its lows of 52,212.44ps, before closing slightly above its opening level at 52,321.29bps.
Market technicals were positive and mixed with lower volume traded when compared to the previous session in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 49% buy position and 51% sell volume. The total transaction volume index stood at 0.99 points, just as impetus behind the day’s performance was strong as Money Flow Index reads 81.38pts, from the previous day’s 81.31pts, indicating that funds entered the market, despite closing flat.
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Index and Market Caps
At the end of Monday’s session, the composite NGXASI inched 16.67 basis points up, closing at 52,231.29bps, from its 52,214.62bps opening level, representing a 0.03% up, just as market capitalization rose by N9.00bn to N28.44tr, from the previous day’s N28.43tr, which also represented a 0.03% value gain.

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The upturn was driven by position taking in the shares of Julius Berger, Wapco, Oando, NCR, Transcorp, Fidelity Bank and Nahco among others, which impacted mildly on Year-To-Date gain as it increased to 1.91%. Market capitalization YTD gain inched up to N154.13bn, representing 1.88% above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed with the NGX Insurance and Banking closing 1.41% and 0.02% lower respectively, while the NGX Consumer goods led the advancers with a 0.03% marginal gain, followed by Industrial goods with 0.02%. while NGX Energy index closed flat.
Market breadth was nonetheless positive as gainers surpassed losers in the ratio of 24:19, while transactions in volume and value were down after investors exchanged 626.39m shares worth N5.60bn, driven by trades in Transcorp, Accesscorp, FBNH, UBA and Royal Exchange.
Oando and NCR were the best performing stocks, gaining 9.91% and 9.77% respectively, to close at N6.10 and N2.81 per share, on market forces. On the flip side, CWG and NEM Insurance lost 9.66% and 9.45% respectively, closing at N1.87 and N4.12per share, purely on profit taking.

Market Outlook
We expect mixed sentiments to continue on reaction to inflation data and payments for dividend to support buying interest, just as investors react to corporate earnings ahead of markdown dates, Q1 GDP, MPC meeting and dividend payments.
We note that discerning investors have continued to target fundamentally sound companies 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 rally to take profit. Also looking at the trends and events across the globe and domestically.

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

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