Expect Mixed Trend, Ahead Q2 Earnings, Macroeconomic data, As NGX Capitalisation Gain N2.8tr In June

Market Roundup for June 2023
Trading on the Nigerian Exchange was bullish and eventful in the month of June, on impacts of policy statements by the new administration of President Bola Tinubu, as well as supportive market economic reforms actions. These boosted quarter and half-year NGX returns on a renewed buying interests and positive sentiments to close the month higher, added to improved trading activities for the period which contributed over 50% to year-to-date returns on the exchange. The development was despite the increasing domestic and global economic headwind as revealed by the prevailing mixed macroeconomic indicators.
However, all eyes are on the imperative impacts of such government policies as the fuel subsidy removal, exchange rate unification and the liberalization of the power sector expected to boost electricity supply in the face of rising inflation, high interest rate, insecurity, and post-election litigations, among others.
In all of these, the changing price patterns and trading environment call for cautious trading and investing, as the NGX index action has crossed the 60,000 psychological line on buying interest and profit taking, a situation that created opportunities for discerning investors and traders to build wealth for the period. Consequently, within the month, many stocks hit their new 52-week highs, as the market touched its 16-year high on improved traded volume to reflect the inflow of funds into the market, thereby changing the historical pattern of bearish close for the period.
This year 2023 so far, value, growth and low cap stocks have shown strength and created wealth for investors. The statement is especially true of some low priced stocks that were battered in the aftermath of the global COVID-19 pandemic, and have now become the toast of market players, outperforming the benchmark NGX All-Share index (NGXASI). Many, indeed, rallied above 50%. It is no surprise, therefore, that the market is having a mix trend of oscillation and trending sideways year-to-date.
Technically, year-to-date, the NGX Index action and many stocks are in their value area of resistance and support, waiting for a breakout or breakdown in the second-half of the year 2023, depending on market forces, more policy pronouncement, the appointment of economic managers, policy implementation impact, as well as the unfolding global geopolitical tension. These will drive demand and supply, sentiments, and financials which are the engine that impact prices on the short to long-run.
That notwithstanding, some stocks have recorded huge gains year-to-date and most of you in Investdata buy & sell signal and those at this year master class in Q1 and Q2 have benefited from. In any equity market across the globe, superior fundamentals define leading stocks and impressive corporate earnings have sharp influence on company share prices, especially when positive uptrend in earnings are sustained or established. Also, technically, the best of stocks distinguish themselves with sound base chart patterns.
These notwithstanding, profit taking is inevitable in stock trading, hence the need to trade your plan by having entry and exit strategies in the second-half of this year to avoid being trapped in any position for too long. In the next six months, the small and medium cap stocks are set to outperform the high and large cap equities as most of the highly priced stocks are overpriced and overweighed already, but the entrance of foreign portfolio investors may impact these class of stocks because they are still cheap due to the exchange rate and naira devaluation.
Despite the bullish market in June, every investment or trade is against expectations, let your investment objectives guild your entry and exit decisions, since the beginning of the year 2023. We note that the nation’s equity market has been oscillating as a result of many factors ranging from rising inflation, oscillating rates/yields in the fixed income space, high MPR, slow economic growth and oil price oscillating in the international market as it trades below $80 per barrel. This is not minding that the increase in recent oil production is not reflecting on the nation’s foreign reserves, and security challenges.
During the month under review, there were 19 trading sessions of which the market closed up in 12 days, and down in seven sessions, following which the NGX All-Share index soared higher for the month on a mixed trend. The benchmark index gained all of 5,198.99 basis points during the month, closing at 60,968.27 basis points after breaking out several psychological lines to touch the month’s high of 60,968.82bps, from its lows of 55,361.68bp, after opening at 55,769.28bp, representing a 9.32% growth within the month.
The sentiment report for June revealed buying position of 100% and selling volume of 0%, as total transactions volume index stood at 1.99 to extend the previous month’s bullish position, as market capitalisation also recorded a robust N2.8tr improvement, closing at N32.tr from an opening value of N29.2tr, representing 9.58% gain also. The market had a combination of positive sentiments, selloffs and profit taking on the back of the new government’s pro market polices and economic reforms which boosted investor confidence. The month’s transaction volume improved significantly by 44.58% to 18bn shares, from 12.45bn units in the previous month.
The composite index’s year-to-date gain position stood at 18.96%, just as market capitalisation jumped by N5.62tr, representing 18.93% appreciation YTD from the opening value.
The market breathe in the month of June was strongly positive as gainers outpaced losers in the ratio of 94:22, thereby extending the bullish situation in the month of May, reflecting position taking across all class of stocks, despite price adjustment for dividend, profit booking in medium and low priced equities.
Performance indexes across the sectors and market were up as shown in the chart below, except for the NGX Growth index that was down by 1.17%, whereas the NGX Insurance, Energy, Banking, Premium and Pension outperformed the key performance index after more stocks recorded gains, while losses suffered by low capitalized stocks due to profit taking and price adjustment for dividend were not strong enough to dragged the NGX growth down in the period under review.
At this point, discerning investors should rethink and position early ahead of the half-year earnings reporting season, amidst the relatively low Price-To-Earnings attraction in the market. See the table below for more

Best Performing Stocks for June

Medium and low priced stocks dominated the advancers’ table for the period under review. Particularly, oil and services companies ranked the best performers, led by as FTN Cocoa, an operator in the agric sector, which recently attracted new core investors. Others were Transcorp Hotel, Eterna, Unity Bank and Golden Breweries, on low price attraction and positive market sentiments. Recall that new government policy direction has triggered new entrance into the market, while the NGX still looks forward to better quarterly numbers from these companies. The stocks closed the month higher as indicated in the table below.

Worst Performing Stocks for June

The top losers in the month were low and medium priced, as well as small cap companies, led by conglomerate- John Holt, which shed 45.55%, on the back of profit taking and selloffs, followed by Ellah Lakes as traders took profit from the company’s recent price rally. GSK and Multiverse witnessed selloffs as investors realigned their portfolio for high dividend yields and payout with earnings around the corner. That of Chemical and Allied Product is purely profit taking, considering the company’s impressive numbers, while in the case of Pharm-Deko, it seems investors are reacting to the company’s mixed numbers after initial hope from the previous earnings report. McNichole declined by 4.29%; Tripple Gee, 3.85%; and International Breweries, 2.80% on the back of the recent loss account presented by the company.

Technical View on Monthly Time Frame

The NGX index action has broken out a strong resistance on a monthly chart, which suggests a continuation of trend, as candlestick formation reveal a clear direction, from the previous months’ performance, ahead of major financial news in form of earnings. The state of the expected numbers may trigger more buying interests and positive sentiments for portfolio adjustment and repositioning for Q2 numbers are likely to continue. The inflow to equity assets on a monthly time frame as revealed by money flow index may support trend on smart money reposition their portfolios.
We also, use this opportunity to appreciate all participants and speakers at the Q3 Master Class over the weekend, while hoping that they would make the best use of the incisive encounter in the coming quarters for profitable trading and investing.

Market Outlook
We expect a mixed sentiment and trend, as a result of profit taking and portfolio repositioning ahead of half year earnings reporting season and MPC meeting, which may likely lead to slight pullback or correction following the recent rally. Just as all eyes are on unfolding events in the domestic economy and global environment.

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