Expect Mixed Trends On Profit Taking, Reactions To Q1 Earnings Inflow, Ahead Of Markdown Dates

Market Update for May 2
The first trading session on the Nigerian Exchange in the month of May started on a negative note, witnessing a mixed session and profit taking that short-lived the bull run amidst bargain hunting, increased liquidity, impressive corporate earnings and dividend payments.
Despite this, the mixed outlook for May arising from the popular saying among traders that “sell in May and come back in October,” may not be applicable in the current trend of our market just like has happened over the last five years. As we noted in the Market Roundup for April, the month of May has closed positively 15 times over the past 24 years and could close green this year too. That is, not minding the fact that this is a transition month when there will be a handover of power to a new administration on May 29.
We expect the positive sentiment in the equity space to continue in the new month on the back of impressive Q1 numbers that the market has seen so far, as market players digest these earnings and position in fundamentally sound stocks at this current low prices.
Already, pending 2022 audited accounts are being made available to the market, alongside first quarter corporate earnings majority of which are impressive and beat expectations. The full-year result that emanated from Sterling Bank was remarkable and outstanding, with robust top and bottom line growth that supported a dividend of 15 kobo. Also, there were remarkable Q1 numbers from Nahco, Conoil, Jaiz Bank, and Aiico Insurance, among other, irrespective of the nation’s economic headwinds that resulted from the cash crunch in the first few months of the year.
Also, there is the prevailing low prices of many stocks in the market due to adjustments that has made them attractive for new entry and repositioning of portfolios, especially as GTCO, Nascon, NEM Insurance and others in the midst of high inflation and contracting economic activities as result of high cost of funds that are impacting negatively on the general economy.
Already, the market had extended it recovery from its oversold state, despite Tuesday profit taking in Geregu and others that slow down the All-Share index, as it trades above the T line to test the 20-Day simple moving average and EMA that support uptrend pattern for technical traders and discerning investors.
The prevailing dividend yields and low market price to earnings ratio provides better opportunities for discerning investors to hedge against inflation even when fixed income market yields look attractive. There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as fuel subsidy removal has been suspended to signal possibility of policy shift that may be a plus for equities 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.
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Oil price oscillation continued, as it trades at $75.46 per barrel in the midst of increasing fear of recession and crude inventories decline. As all eyes are on Fed meeting starting today, even when their economies are contracting in the face Ukraine attack and 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. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, Tuesday’s trading opened on the downside and oscillated throughout on buying interest and profit taking in some high cap stocks, a situation that pushed the NGXASI to an intraday low of 52,088.98 basis points from its highs of 52,426.46ps, before closing below its opening figure at 52,299.24bps.
Market technicals were positive and mixed with low 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 62% buy position and 38% sell volume. The total transaction volume index stood at 0.83 points, just as momentum behind the day’s performance was relatively strong as Money Flow Index reads 58.69pts, from the previous day’s 59.98pts, indicating that funds left the market.
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Index and Market Caps
The key performance NGX All Share Index at the end of trading shed 104.27 basis points, closing at 52,296.48bps from its 52,403.51bps opening level, representing a 0.20% decline, just as market capitalization fell by N58.30bn to close at N28.48tr, from the previous day’s N28.53tr, which also represented a 0.20% value loss.
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The downturn was driven by selloffs and profit booking in the shares of Geregu Power, Transcorp, PZ, Africa Prudential, Honeywell and International Breweries among others, which impacted negatively on Year-To-Date gain as it reduced to 2.05%. Market capitalization YTD loss rose to N256bn, representing 2.01% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes were in green, except for NGX Industrial goods that closed 0.8% lower, while NGX Banking led the advancers after gaining 2.84%, followed by Insurance, Energy and Consumer goods with 1.25%, 1.05% and 0.31% respectively.
Market breadth was positive, as gainers outpaced losers in the ratio of 30:21, while activities in volume and value were down after investors exchanged 550.29 million shares worth N5.15bn, with volume driven by trades in Accesscorp, Mansard, Wapic, Fidelity Bnak and UBA.
Conoil and UBN were the best performing stocks for the day after gaining 10% each, to close at N44.00 and N7.70 per share, on impressive Q1 numbers and market sentiment. On the flip side, Geregu Power and Transcorp lost 10% and 9.96% respectively, closing at N290.70 and N2.53per share, purely on profit taking and selloffs.

Market Outlook
We expect mixed sentiments on profit taking and reaction to corporate earnings, ahead of markdown dates, as market players digest Q1 earnings that had hits the market in the midst of price adjustment and dividend payment.
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