Expect Mixed Trend On Bargain Hunting, Full Year Earnings, Repositioning For H1 Reports

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

Trading activities for the first in the month of June closed bearish on the Nigerian Exchange after the benchmark All-Share index closed lower, wiping off the previous week’s gains on the back of selling pressure, and profit-taking activities of market players. The pullback during the week was also driven by price adjustments in highly priced stocks like Nestle Nigeria, Dangote Cement, Seplat Energy, and others for the dividend recommended by their various boards.  Also, selloffs continued across the major sectors for the period, except insurance which closed marginally up, just as funds continue to flow into the fixed income space appealing to some investors, especially those who are risk-averse, and ahead of the release of the consumer price index by the National Bureau of Statistics (NBS).

In any market condition, all you need is price because assets prices trend in volatility, whether low or high volatility, so when investing in the stock market, always approach it as a stock market, regardless of the environment or situation, because there are always stocks showing leadership and trending higher. Here, you may have to look harder to identify them, and depending on current market conditions, there are always stocks that are going up. The same can be said for weak stocks, regardless of the environment or situation, there are always stocks that are traveling south too. So look for stocks with best momentum and relative strength characteristics.

In the ongoing market correction, following and trading prices actions simply mean that the market tells you what to do and not the other way round because price is always right as it does not care what 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 stop loss is not in use.

Bear markets move with greater velocity than bull markets and are accompanied by high volatility, due to investors’ emotions. With the rate hike triggering the flow of funds from equities to the fixed income market, the spiraling inflation may support the entry of funds into commodity-backed securities or stocks to hedge against inflation. Also, investors and analysts are keeping a close watch on developments around the political space, ahead of next year’s general elections,

In the period under review also, the share prices of Chemical and Allied Products, Dangote Sugar, Conoil, Sterling Bank, Julius Berger NPF Microfinance, Aluminum Extrusion and other were adjusted for dividends as recommended by their directors.

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Movement Of NGXASI

It was a sell market for the week as the NGXASI recorded four trading sessions of down markets and a day of positive outing, due to bargain hunters taking advantages of pullbacks to position in blue-chip stocks that had suffered losses as a result of profit taking and selloffs.

Trading for the week started on a negative note, halting the previous day’s gain after the index pulled-back 0.34% on Monday, a situation that extended to Thursday as some market players seemingly fell in love with the relatively improved yields in the fixed income market due to the recent hike in the benchmark Monetary Policy Rate by the Central Bank of Nigeria (CBN) to 13%. The index fell 1.43% on Tuesday, 0.03% and 0.25% by the midweek, and Thursday. It rebounded on Friday when it gained 0.20% on the rekindled buying interest in banking stocks like Zenith Bank, Accesscorp, UBA, FBNH and others like UACN. This brought the week’s total loss to 2.18%, compared to the previous week’s 2.09% gain.

Consequently, the NGXASI shed 1,177.06 basis points for the week, closing the week at 52,908.24bps, after touching an intra-week low of 52,803.19bps, from its highs of 54,085.30bps, which was also its opening level for the week. Market capitalisation also fell during the period by N630bn, closing at N28.52tr, from the previous week’s N29.16tr, which also represented a 2.18% value loss.

The top advancers’ table was dominated by low cap stocks, while medium and large cap companies witnessed selling sentiment as portfolios reshuffling continued in the midst of markdown for 2021 dividends as 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 high earnings yields to accumulate positions.

Market breadth for the week was negative, as losers outnumbered gainers in the ratio of 45:36 on selling pressure, as revealed by the investor sentiment report showing 92% ‘sell’ volume and 8% buy position. Money Flow Index was looking down at 58.19bps from the previous week’s 64.65 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 flo index inched up to reveal that funds entered  the market on Friday.

NGX index’s action on a weekly chart had formed a bearish engulfing candlestick, to remain strong after pulling back on strengthen of selloffs and markdown, as the index trades above the ‘T’ line to signals reversal and continuation of uptrend after breaking down major strong support levels of 54,290.84 points and psychological line of 53,000 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 losing momentum, as players reacted to 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 continuation of the trend, depending on market forces in the new week as last Friday’s trading pattern revealed buyers are in control.

Bearish Sectoral Indices

Sectorial performance indexes for the week were red, except for NGX Insurance that closed higher by 0.83%, while NGX Industrial goods led the decliners, after losing 3.73%, followed by Consumer goods, Banking, and Energy with 2.51% 0.73% and 0.45% respectively.

Transactions in volume and value terms were up as stockbrokers traded 28.74bn shares worth N209.06bn, compared to the previous week’s 1.84bn units valued at N27.29bn, with volume driven by Financial Services, Conglomerates, and Consumer goods sectors. Specifically, the market witnessed heavy volume movements in Union Bank as the acquisition by TIG, the core investor in two-year old Titan Trust Bank, was consummated following regulatory approvals, during week at N7 per unit for the 27.95 billion shares. There also volume movements notices in Transcorp, FBNH, Accesscorp and Zenith Bank.

Nahco and Jaiz Bank were the best-performing stocks in the week, gaining 22.72% and 15.38% respectively, closing at N7.94 and N0.90 per share on the 41 kobo dividend and bonus of one-for-five, and market forces. On the flip side, Conoil and Wema Bank lost 15.04% and 12.33% respectively, at N29.10 and N3.20 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 latest full year earnings reports earnings as few others are expected in 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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  1. The State of the Market & 2022H2 Opportunities: Looking at The Fundamental Mix
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  3. State of the Economy & Negative Real Rate Of Return In the Fixed Income Market


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CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605

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