Expect Mixed Trend, Amid Bargain Hunting, Ahead May Inflation Data, March FY Earnings

Market Update for the Week Ended June 10 and Outlook for Jun 13-17

The nation’s stock market rebounded in the past week on renewed buying interests among blue-chips and large cap companies that impacted the key performance NGX All-Share Index which closed higher. The index, thereby, halted previous week’s negative outing on a very high traded volume in the midst of a negative market breadth and expectation of macroeconomic data.

The week recorded positive sentiments and momentum, despite price adjustments in medium and low priced stocks like UACN, Ecobank Transnational Incorporated, Trans-nationwide express, Courtville Business Solution, and Skyway Aviation, among others, for the dividends recommended by their various boards. Also, buying interests continued across the major sectors, except insurance and banking that closed marginally lower, despite the continued flow of funds into the fixed income space appealing to some investors, especially the risk-averse, and ahead of the release of the consumer price index by the National Bureau of Statistics (NBS).

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Oil prices dipped slightly within the week in the international market, while oscillating and trading at $120.50 per barrel, after touching a two-month high of $124.30 on the reopening of China provinces locked down due to Covid 19, amidst Saudi Arabia’s July futures price rise. We do not expect that news of the US president’s visit to that country would 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.

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Movement Of NGXASI

It was a mixed market during the week as the benchmark NGXASI recorded three trading sessions of up markets and two days of negative outing, as bargain hunters took advantage of the pullbacks to position in blue-chip stocks that had suffered losses as a result of price correction.

The NGX Index action opened the week on a positive note, extending the previous day’s gain after the index inched up 0.24% on Monday, a situation that extended to Tuesday as some market players increased positioning on relatively improved dividend yields in banking stocks and others, despite the seeming growth in the fixed income market yields due to the recent hike in the benchmark Monetary Policy Rate by the Central Bank of Nigeria (CBN) to 13%. But at the midweek, the benchmark index fell 0.14% on profit taking, which moderated on Thursday with the market losing just 0.04%, but retracing up on Friday when recovered 0.06% on the rekindled buying interests in banking stocks like Stanbic IBTC, Accesscorp, FBNH and others like Fidson Healthcare, Presco, Transcorp. This brought the week’s cumulative gain to 0.55%, compared to the previous week’s 2.18% loss.

In all, the NGXASI gained 293.14 basis points during the week, closing at 53,201.38bps, after touching an intra-week high of 53.276.70bps, from its lows of 52,889.10bps, after opening the week at 52,908.24. Market capitalisation also rose during the period by N158bn, closing at N28.68tr, from the previous week’s N28.52tr, which also represented a 0.55% appreciation in value.

The week’s top advancers’ table was dominated by low and medium cap companies that attracted buying sentiments as portfolio reshuffling continued in the midst of markdown for 2021 dividends while a few March year-end accounts are expected in the market ahead of economic data and half year earnings season. Also noteworthy is the fact that investors are taking advantage of the pullbacks and expected earnings reports to accumulate positions.

Market breadth for the week was negative, as laggards outnumbered gainers in the ratio of 36:29 on buying interest, as revealed by the investor sentiment report showing 81% ‘buy’ volume and 19% sell position. Money Flow Index was looking down at 51.26bps from the previous week’s 58.19 points, an indication that funds left the market on a weekly chart to confirm the inflow of funds into fixed income instrument and others, while on a daily time frame money flow index was flat to reveal that funds entered the market on Friday.

The NGX index’s action on a weekly chart formed a strong support level as the former resistant points turned to support, while the market remains strong in the face of demand, profit taking and price adjustment. We note also that the index is trading above the ‘T’ line to signal the likelihood of reversal and continuation of the uptrend after breaking out major strong resistance level of 54,085.84 points on a very high traded volume to remain above the 20- and 50-day moving average to reveal strength. The candlestick formation, at the end of the week, showed that the market is gaining momentum, as players reacted to news of the MPR hike and Q4 March year end numbers already released, macrocosmic data, and other factors to reposition their portfolios for Q2 earnings seasons. The candlestick pattern indicates price correction or retracement of the trend, depending on market forces in the new week as last Friday’s trading pattern revealed buyers are in control.

Mixed Sectoral Indices

Sectorial performance indexes for the week were mixed, as NGX Banking, Insurance and consumer goods closed lower by 2.12%, 1.61% and 0.10% respectively, while NGX Oil/Gas led the advancers, after gaining 0.68%, followed by Industrial goods with 0.25%.

Activities in volume and value terms were down as market players traded 1.83bn shares worth N19.49bn, compared to the previous week’s 28.74bn units valued at N209.06bn, with volume driven by Financial Services, Conglomerates, and Consumer goods sectors. Specifically, was driven by trades in FBNH, Transcorp, UBA, Accesscorp and Zenith Bank.

Global Spectrum Energy and Conoil were the best-performing stocks in the week, gaining 10% and 9.97% respectively, closing at N2.75 and N32.00 per share on market forces respectively. On the flip side, Industrial & Medical Gases and ETI lost 16.82% and 11.20% respectively, at N9.15 and N11.10 per share, purely on price adjustments for dividend and profit taking.


Outlook for the week

We expect a mixed trend amid market on bargain hunting and reactions to the expected consumer price index for May, as more March full-year earnings reports begin to hit the market any moment from now. Also, investors are repositioning for half-year earnings reports, as market players continue to digest PMI that drop to 53.9 points in May from 55.8points in April according to Stanbic IBTC reports, Q1 2022 GDP and Q1 corporate earnings.  Also, investors and traders continue reacting to the earnings power, as the revaluation of quoted companies on their earnings performance and growth prospects continue. We note that income investors have sustained buying into interim dividend-paying stocks.

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