Market Update for June 27
Prices of Nigerian equities closed higher on Monday to start the last trading week of the month on a positive outing, as it sustained its bullish momentum for the fifth consecutive trading sessions on the back of bargain hunters accumulating undervalued blue-chips with a high prospect of maintaining their interim dividend policy in the second-half of the year.
This situation pushed the NGX All-Share Index higher on a less than average traded volume and positive market breadth. The buying sentiment and momentum followed end of the quarter portfolio rebalancing, as players look to the final trading days of the second quarter.
Given that every investment is against expected future return, stocks are fantastic financial instruments to trade if you understand timing and season, allowing your entry and exit strategies to be guided by dates and technical tools, especially as the half-year earnings reporting season draws closer daily. When it comes to trading, there are different thinking among players whether you are a trader or investor, as companies are classified into dividend-paying, growth, and value stocks, among others. Also understanding what is happening in each sector and how such will influence company performances positively or otherwise is key and important, because equity prices feed on company earnings. Also, it is important that you look at market cap to know where a company, or stock belongs- whether large, medium, or low cap to help you evaluate each, because a stock can be cheap and expensive at different phases of the market.
Monday’s trading has confirmed an uptrend after the index sharply rebounded last week, a good development for investors and traders, since it broke out the 51,804.21 basis points level and ‘T’ line ahead of the 52,000bps to test 51,986.94 on a relatively low traded volume. The NGX index crossed the ‘T’ line to trade above the 50-Day Moving Average signal buy opportunities in the market, because buying interests have improved from the previous sessions to confirm another rally is underway. Also, breakout traders are taking advantage of the crossover to accumulate positions in stocks that recently pulled back especially the interim dividend paying companies.
To avoid missing out the earnings season opportunities in a changing market momentum, we invite you to attend the Investdata Q3 Master Class, were we will discuss how you can exploit the hidden forces which are driving today stock market and what you should expect in Q3 as political and electioneering activities for 2023 general election has kickoff for the parties and INEC. How to use technical analysis to make key trading and investing decision at the current market situation. Current developments in the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, while actively buying more, as seen in the recent market corrections. Despite the selling sentiment witnessed before now, it is time to go shopping for undervalued stocks, sectors and hot stock opportunities for this market.
Oil prices have rebounded again as its continued to oscillate in the international market, to trade at $116.5 per barrel, even as G7 leaders discussed a possible price cap on Russian oul as a way to further squeeze Moscow, which is continuing to reap hefty dollar. Just as Russia defaulted on its sovereign debt for the first time since 1918. Oil shippers are using several ways to cover their dealing with Russia by using China’s yuan instead of dollar. There is a palpable worry that these chronic high energy prices continue killing the global economy, heightening inflationary pressures across the globe on a weak economic outlook. This is also influencing the 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. Nonetheless, Nigeria’s soaring inflation is a potent threat to its fixed income market and investment yields, which should be an indication that there will be a reversal of funds flowing to the equity space in no distant time as institutional investors balance their portfolios.
Technically, the NGX index action has rebounded to confirm the strong strength behind the new move, as the market remains strong. The strong resistance level has been within the 52,530 basis points region, while volatility persists and rallies towards the next breakout is sported around 52,119.80bps. Should the index break this point, the next visible resistance is 52,247.43bps.
The possibility of the trend being sustained is high and a function of market forces and improved economic conditions during this month and beyond, following which we advise investors to play defensive stocks and reduce investment risks around the market. This, they can do by effectively using predetermined stop-losses and trading plans always guided by entry and exit strategies we noted earlier.
Meanwhile, Monday’s trading opened slightly on the downside and oscillated to rebound at midday before extending its gains on bargain hunting in agribusiness, banking, telecoms stocks and other blue-chip companies. This pushed the NGX’s index to an intraday high of 51,986.94bps from its lows of 51,703.49ps before closing above its opening points at 51,962.85bps.
Market technicals were positive and strong, as volume traded was higher than the previous day’s in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 92% buy position and 8% sell volume. The total transaction volume index stood at 0.84 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking down at 41.59pts, from the previous day’s 49.5pts, indicating that funds left the market, despite up market.
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Index and Market Caps
Meanwhile, at the end of Monday’s trading, the benchmark NGX All-Share index gained 257.24bps, closing at 51,938.88bps, after opening at 51,705.61bps, representing a 0.45% growth. Similarly, market capitalization rose by N125.76bn, closing at N28.00tr, from the previous day’s N27.87tr, which also represented a 0.45% appreciation in value.
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Monday’s upturn was driven by buying interests in Okomu Oil, MTNN, Ecobank Transnational Incorporated, Oando, which is at the verge of delisting from the exchange, Fidelity Bank, Stanbic IBTCM Zenith Bank, and United Capital, among others. This impacted positively on Year-To-Date gain, which rose to 21.65%, while market capitalization growth stood at N5.14tr YTD, representing a 25.21% rise over the opening level for the year.
Bullish Sector Indices
Performance indexes across sectors were mixed, as the NGX Insurance, Banking and Energy closed higher with 1.50%, 0.51% and 0.12% respectively, while NGX Consumer goods was down by 0.56%. Just as NGX Industrial goods closed flat for the day. Market breadth turned positive, as advancers outnumbered decliners in the ratio of 18:16; just as activities in volume and value terms were up, after investors traded 262.42m shares worth N1.83bn, with volume driven by trades in Living Trust Mortgage Bank, Transcorp, Accesscorp Oando and UBA.
ETI and John Holt were the best-performing stocks, gaining 9.79% and 9.52%, closing at N10.65 and N0.69 per share respectively on Q2 earning expectation and market forces. On the flip side, PZ and Eterna lost 10% and 9.33% respectively, closing at N11.25 and N6.80 per share, purely on profit taking.
Market Outlook
We expect the trend to continue on bargain hunting and end of the quarter window dressing by fund managers, as players take advantage of breakouts to position in value stocks ahead of quarter-end window dressing and interim dividend season to reposition. Also, some March year-end audited accounts companies hit the market any moment from now. We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists and players digest the macro-economic data and earnings forecast released so far. Analysts are also expecting the inflation report to support recovery in the new July amid oil prices oscillation. Also, the market continues to interpret the rising inflation in relation to the crude oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend-paying stocks in the hope of dividend announcements.
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Smart investors and traders know that highly volatile markets create exceptional opportunities, while novice and amateur traders can often have a different response to volatility, which leads to FEAR.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
