Expect Positive Trend Still, As NGXASI Tests New Highs Despite Profit Taking, On Fiscal Reforms, Appointments

Market Update for July 11

The bullish upbeat on the Nigerian Exchange continued Tuesday, as the benchmark NGX All Share index closed higher on a low traded volume and positive sentiments, just as position taking supported inflows into different classes of stocks. This pushed NGX index to an all-time high, after testing 66,000 basis points-mark on a positive market breadth driven by reactions to recent policy direction and economic reforms initiatives of the new government.
The NGX uptrend has confirmed the bullish pattern to form three white soldiers which occurs at the close of Tuesday’s trading after opening and closing progressively higher than the previous days to breakout another psychological line of 65,000 basis points, to trade slightly above the 2008 all-time high on a very strong bullish markup phase supported by buying pressure. This chart pattern supports a continuation of trend, or correction that also needs confirmation as midweek trading opens.
Despite some profit taking activities, sectorial rotation, portfolio realignment continued ahead of the half-year earnings reporting season and this month’s Monetary Policy Committee meeting. All of this are happening against the backdrop of an environment where reform policies are driving hyperinflationary pressure in the face of an already heated economy and headwinds ranging from rising inflation, high interest rate regime and insecurity, among others.
The NGX extended its uptrend on a positive sentiment and buying interest, in the midst of traders booking profits from the ongoing rally. Investors should know that profit taking is part of market dynamics. This is why with the changing market structure as a result of the gradual return of foreign portfolio investors and trading environment, we look forward to a mixed outing and intermittent profit taking, since factors that pushed the market to this level remain unchanged so far.
We also note that the earnings reporting season will reveal the actual state of quoted companies and others, which would expectedly be the game changer as we go into the quarter. Already, all eyes are on the expected appointment of economic managers and minsters by this new government, a situation that will determine their rating of the new administration.
Major sectors of the market witnessed a negative performance as profit taking hit some sectors in the face of buying interests in others, especially industrial and energy companies that pushed the index higher. This was as more quoted companies notified the exchange and investors of insider dealings, their closed periods and board meeting dates to approve the half-year financials, while Flourmill and Honeywell informed the exchange of delay in releasing their audited account for March year end.
The NGX index’s action continued to trade above its T-line, 100-Day Simple Moving Average and 200DMA on the daily and weekly chart in the midst of government economic and financial market reforms. This calls for a change in trading strategies and caution, amid the possibility of profit taking and correction any time. As such, technical traders and discerning investors must be guided, because higher prices will lead to lower dividend yields, even when market Price to Earnings Ratio is relatively low. It however provides better opportunities for investors to hedge against inflation even when fixed income market yields look attractive and remain mixed in the face of high inflation.
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Oil price oscillation continued as it extended gains to trade at $79.27 per barrel in the midst of US crude inventories rise and fear of global recession, as rate hike persists across many economies. Even as the Russia-Ukraine war remain a concern, the prevailing high interest rate regime and slowing inflation. Also, supply tightened due to the Russia-Ukraine conflict that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Tuesday’s trading opened on the upside, despite NGX technical glitch and was sustained throughout the session, in the face of profit-taking and buying interest in highly priced stocks that pushed the Index to an intraday high of 66,000bps, from its lows of 64,516.55ps, before closing at 65,669.29bps above it opening points.
Market technicals were positive and mixed with a lower volume traded when compared to that of the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 78% buy position and 22% sell volume. The total transaction volume index stood at 0.90 points, just as impetus behind the day’s performance was strong, with Money Flow Index reads 90.17pts, from the previous day’s 90.14pts, indicating that funds entered the market.
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Index and Market Caps
At the end if Tuesday’s trading, the benchmark NGXASI gained 1,065.60bps closing at 65,669.29bps, from its 64,603.69bps opening level, representing a 1.65% growth. Market capitalization also rose by N580.231bn to N35.76tr, from the previous day’s N35.18tr, which also represented a 1.65% value gain.
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Meanwhile, Tuesday’s upturn was driven by positioning in shares of Dangote Cement, BUA Cement, Okomu Oil, Conoll, MRS Oil, Fidson, May/Baker and Dangote Sugar among others. This impacted positively on Year-To-Date growth, reducing it to 28.13%, while Market Capitalization YTD gain increased to N7.72tr, representing 28.00% above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed with the NGX Industrial Goods and Oil/Gas indexes closed 7.48% and 0.73% higher respectively, while NGX Banking led the decliners after losing 3.10%, followed by Insurance and Consumer goods with 2.14% and 0.43% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 40:33, while activities in volume and value were down after investors exchanged 844.72illion shares worth N9.41bn, driven by trades in, Chams, FCMB, Universal Insurance, UBA and Transcorp.
Transcorp Hotel and FTNCocoa were the best performing stocks, gaining 10% each, closing at N39.50 and N3.85 per share respectively, on positive market forces and sentiment. On the flip side, CHI Plc and Champion Breweries lost 10% and 9.89% respectively, closing at N1.17 and N3.92per share, purely on profit taking.

Market Outlook
We expect the positive trend and sentiments to continue in the midst profit taking and portfolio realignment, as supportive reforms of the government, more policy pronouncements and appointments would offer investment direction. Also, Q2 earnings reporting season draws closer to confirm the real state of the company performance and attract liquidity in the midst of markdown dates and the release of remaining audited accounts.
We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios. 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