Expect Sustained Mixed Sentiments On Bargain Hunting Amidst Profit Taking, Economic Concerns

Market Update for July 18

The nation’s stock market extended its rebound on Tuesday on positive momentum and buying interest across different classes of equities ranging from low, medium and high cap companies. This combined with value oriented sector rotation which continued on fundamental happenings, macroeconomic data, ongoing economic reforms and expectation of more half year corporate earnings reports, ahead of next week’s meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee. During the session, FTN Cocoa Processors Plc presented its Q2 numbers with numbers below expectation to support the current price of the stock, so market players should be guided in this regard until positive numbers or impressive performance are in sight.
It is expected that the MPC meeting should review the impact of the various government policies announced since May 29, and the likely impact in the next two months. Consequently, we see a pause in rate adjustment by the MPC members at next week’s meeting. Considering the inflationary pressure of subsidy removal since this new government came on board, especially as exchange rate and pump price of fuel are heading to a thousand naira in already a heated economy.
The outcome of the forthcoming MPC meeting should give the nation’s financial market and economy a direction, with the possibility of continued rates hike, or a pause, we note that monetary policy reforms and financial sector reset are ongoing aimed at achieving the 6% GDP growth target of the government, while attracting domestic and foreign investments. We note also that the CBN, last week, reviewed the Cash Reserve Ratio for Merchant Banks to 10%, from 32.5% so as to boost long-term financing in the system, a move that looks good. However, a continuation of policy mismatch may not help at this current situation, as there should be rebalancing to drive the economy and come out of this stage for a clear direction.
The increasing inflow of funds into the equity space and the NGX rebound are signals that the bulls are underway, but we need to confirm this when the market opens today, as the benchmark index’s is heading to breakout the 64,000 mark again on improved buying pattern. That is expected to support the markup phase, while the chart pattern supports a continuation of trend, or correction.
As all eyes are on more half year earnings release, sector rotation and portfolio reshuffling continued 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 markup phase on a positive sentiment and buying interest, in the midst of profit taking in some banking stocks. Investors should know that profit taking is part of market dynamics. This is why despite the changing market structure as a result of 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 state of corporate earnings 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.
The major sectors of the market witnessed a bullish performance on increased position taking and buying interests among low, medium and high cap stocks, especially insurance, industrial goods and others that pushed the index up. 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.
The NGX index’s action has broken out the T-line to trades above 50-Day Simple Moving Average and 100DMA 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 buying into value companies, 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.
To navigate the rest of the quarter and year profitably using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent bull-run. Despite the mixed volume pattern witnessed recent days, it is time to go shopping for undervalued stocks, sector rotation, go for defensive stocks and the next insider playing opportunity,
Oil price oscillation continued, trading at $79.62.per barrel in the midst of fundamentals countering economic concerns and unclear rate direction of fed, as inflation rate gradually slowdown across many economies. The Russia-Ukraine war remains a major 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 and was sustained throughout the session, on buying interests in blue chip stocks and others that pushed the Index to an intraday high of 63,766.72bps, from its lows of 62,874.10ps, before closing above it opening points at 63,766.72point.
Market technicals were positive and strong with a higher volume traded when compared to the previous session in the midst of breadth favoring the bulls on a buying pressure as revealed by Investdata Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 0.89 points, just as energy behind the day’s performance was strong, with Money Flow Index reads 79.92pts, from the previous day’s 79.53pts, indicating that funds entered the market.
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Index and Market Caps
The benchmark Nigerian Exchange All-Share Index, at the end of the day trading gained 823.37bps closing at 63,766.72bps, from its 62,943.35bps opening level, representing a 1.31% growth. Market capitalization also rose by N448.33bn to N34.72tr, from the previous day’s N34.27tr, which also represented a 1.31% value gain.
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Meanwhile, Tuesday’s upturn was driven by positioning in shares of Dangote Cement, FBNH, Transcorp, Mansard, Eterna, Wapco and Aiico Insurance among others. This impacted positively on Year-To-Date growth, increased it to 24.4%, while Market Capitalization YTD gain increased to N6.93tr, representing 24.1% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes were up, except for NGX Banking that closed lower by 0.2%, while NGX Insurance led the advancers after gaining 4.25%, followed by Industrial, Consumer goods and Energy with 3.6%, 0.7% and 0.6% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 50:28, while activities in volume and value were up after investors exchanged 868.8m shares worth N42.8bn, driven by trades in FCMB, Japaul Gold, Dangote Cement, Accesscorp and Fidelity Bank.
NEM Insurance and NPF Microfinance were the best performing stocks, gaining 10% each, closing at N5.94 and N1.87 per share respectively, on positive market forces and sentiment. On the flip side, Japaul Gold and FTNCocoa lost 10% and 9.8% respectively, closing at N0.81 and N2.29per share, purely on profit taking and unimpressive Q2 numbers.

Market Outlook
We expect mixed sentiments to continue on bargain hunting in the midst of profit taking, economic concerns and portfolio repositioning amidst supportive reforms of the government, just as more policy pronouncements and appointments would offer investment direction. Also, as more Q2 earnings reports are expected 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