Investors Await Market Direction, Realign Portfolios, Amid Bearish Divergence, Markdown Dates

Market Update for June 8

It was a mixed session on the Nigerian Exchange on Thursday, as profit taking continued for the second consecutive session on an above average traded volume and positive market breadth, in the midst of buying sentiments and declining momentum as revealed by money flow index. The benchmark All-Share index closed lower below the 56,000 to form a bullish hammer candlestick and at the same time top pattern reversal that need confirmation as the market opens Friday morning. The index pulled back strongly during the intraday trading to test the T line before retracing up, even as the market’s big trend remains intact as investors react to the positive economic policies of the government, despite the profit booking and selloffs in some highly priced stocks.
The bearish divergent from the momentum indicators continued even as the NGX index traded above the average traded volume on mixed technicals in the absence of fundamental news with market players locking in gains that were driven by the inaugural speech of President Bola Tinubu. Others are, however, positioning on expected policy pronouncements, guidelines and appointments of economic managers to give a clear direction of the market in the medium to long-term, as the market looks forward to the Consumer Price Index report for the month of May next week, and Q2 earnings reporting season in July.
The NGX index’s action remained at its distribution phase to signal cautious trading, even as traders and investors wait to confirm the new trend from this ranging pattern at its 16-year high, in the midst of a dicey outlook for the month of June. Historically, the month has been known for profit taking and selloffs for portfolio repositioning ahead of the half-year earnings season when positioning takes place for Q3 in the second half of the year. Meanwhile, more companies continue to notify the exchange and investing public of their AGM resolutions and closed period for half year financials. Just as the market earnestly awaits the audited financials of March year-end companies.
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Oil price continued its oscillation pulling back again to trade at $75.54 per barrel as price headed for weekly loss in the midst of Saudi production cut and fears that the Feds could raise rates again this month, in the face of economic contraction and possible recession due to central banks rates hike. Just as Ukraine and Russia war continued. This is in addition to rising geopolitical tensions 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 conflict that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Meanwhile, Thursday’s trading opened slightly in the red and oscillated throughout the session on buying interest in some blue chip stocks and selloffs in large cap companies, a situation pushed the NGXASI to an intraday low of 55,361.68bps, from its highs of 56,030.97ps, before closing slightly below it opening figure at 55,956.59 point.
Market technicals were positive and mixed with a higher volume traded when compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 82% buy position and 18% sell volume. The total transaction volume index stood at 1.00 points, just as impetus behind the day’s performance was strong, with Money Flow Index reads 78.38pts, from the previous day’s 81.08pts, indicating that funds left the market.
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Index and Market Caps
At the end of Thursday’s trading, the composite NGX All-Share Index shed 67.93bps, closing at 55,956.59bps, from its 56,025.56bps opening level, representing a 0.12% drop, just as market capitalization fell by N37.01bn to N30.47tr, from the previous day’s N30.51tr, which also represented a 0.12% value loss.
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The day’s downturn was driven by profit taking and selloffs in the shares of Dangote Cement, GTCO, UBN, GSK, Caverton and John Holt among others, which impacted mildly on Year-To-Date gain that slight down to 9.18%. Market capitalization YTD gain reduce to N2.84 trillion, representing 9.15% above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Industrial and Consumer goods closed 0.71% and 0.13% lower respectively, while the NGX Insurance led the advancers after gaining 3.97%, followed by Energy and Banking with 1.00% and 0.99% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 40:13, while activities in volume and value were up after stockbrokers traded 531.78 million shares worth N7.68bn, driven by trades in, UBA, NPF Microfinance, Accesscorp, Zenith Bank and Dangote Sugar.
e-Tranzact and Japaul Gold were the best performing stocks, gaining 10% each, and closing at N4.84 and N0.44 per share, on market forces and sentiments. On the flip side, John Holt and Caverton lost 9.68% and 7.14% respectively, closing at N1.40 and N1.30per share, purely on profit taking.

Market Outlook
We expect the mixed sentiments and trend to continue until fundamental news and policy implementation guidelines of the government to give market direction, as portfolio realignments persist in the face of bearish divergence in market technicals, in the midst of markdown dates, dividend payment and expected March year end audited accounts.
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