Investors Loss N1.01tr In April, Amid Price Adjustments In Banking, Blue-chips, Energy Stock
Market Roundup for April 2023
Transactions on the Nigerian Exchange closed positively on Friday, but it was not enough to prevent the All-Share Index from closing the month of April lower thereby extending two months of correction and pullbacks. This was despite the renewed buying interests and positive sentiments, with investors reacting positively to corporate actions, while weighing the deluge of Q1 numbers in the midst of rising inflation and oscillating yields in the fixed income space.
History repeated itself again this year as the benchmark NGXASI closed negative in April, confirming a 24-year market data analysis of INVESTDATA research, showing that the month and, indeed, Q2 over the years, have remained a period of position taking on the Nigerian equity market. In all of those 24 years, Nigeria’s benchmark equity index has closed green for 13 of the 24-year period, and red in 11 years between 2000 and 2023.
Meanwhile, the influx of Q1 financials, few second and third quarter numbers, coupled with unaudited full-year March accounts boosted market recovery this period.
The candlestick pattern that represents the month’s mixed trading activities that extended the pattern in the month of March, while technically forming a bullish hammer candle that supports a reversal and uptrend. This is therefore signaling the beginning of a short bull-run in the new month, depending on market forces.
Combining this fact with the current situation in the market, we conclude that the NGX has a stronger possibility of rallying in the month of May, apart from the high Treasury Bills rates and bond yields that remain potent threats to equity prices. Investors’ reaction to the first quarter numbers recently released and the qualification dates for dividends will determine how far the market will go in this new month. Also being the month of transition from the current government to a new one, all eyes are on May 29, 2023 for the incoming government to hit ground running.
Nevertheless, we note that economic fundamentals are still mixed and dicey, as players look forward to the Q1 GDP report, April inflation data, the Purchasing Managers’ Index, and indeed, the outcome of this month’s Monetary Policy Committee meeting, given the changing realities, will go a long way in influencing market performance. We saw the impact of the Islamic holy month of Ramadan when Muslims across the globe observe fasting and abstinence, and the usual food scarcity that characterize the planting season, further impacting Nigeria’s inflation rate negatively. We expect a significant positive adjustment in food inflation, especially with the rising insecurity challenges that have resurfaced after the elections to affect farmers and businesses.
The NGX recorded 16 trading sessions during the month under review, due to the four days of public holidays declared by government, as the composite NGX All-Share index oscillated closing eight sessions each up and down. All the end, the benchmark index shed 1,828.83 points, closing at 52,403.51bp after breaking down the psychological line of 52,000 and the support level of 51,268.64 from its 54,232.34bp opening level, representing 3.37% decline.
The ‘buy’ volume of total transactions for the month was 43% and 57% sell position, extending the previous months’ down market, as volume index for the period stood at 1.65, while market capitalisation recorded N1.01tr loss at N28.53tr, from an opening value of N29,54tr, representing 3.42% depreciation in value. The market had mixed sentiments and reactions to the audited financials and Q1 scorecards that beat investors and analysts’ estimates. The month’s traded volume was up by 67.73% at 10.50bn shares, from 6.26bn units in the previous month.
The index’s year-to-date gain, therefore, stood at 2.25%, just as market capitalisation growth dropped to N309.88bn representing 2.22% lost YTD from the opening value.
Market breadth for April was however flat as decliners equaled to advancers in the ratio of 45:45 to continue the bear transition, reflecting the mixed economic data, selloffs in highly capitalised stocks and the barrage of first quarter earnings reports that hit the market. Earnings reports during the month were impressive and higher than market expectations, especially such sectors as financial service providers, consumer goods, Telecommunication, Energy and others. They helped some of the major indexes to close positively, while others were down on the performing sectors chart for April.
The sectoral performance chart below shows that banking, energy and industrial stocks pulled the market down in the period under review, coupled with price adjustment for dividend, sliding by 3.28%, 1.55% and 0.80% respectively compared to 3.37% decline recorded by the benchmark Index. It was followed by mixed sentiment and positive momentum, reflecting investor confidence in dividend paying stocks, especially blue chip companies that were markdown for dividend which had been resilience over the years; as NGX Consumer goods and Insurance index moved higher by 4.75% and 3.87% respectively.
Best Performing Stocks for April
The month’s best performer was Transcorp, a major low price stocks that rallied on momentum investing due to change in holding structure of the company and the five kobo dividend, despite the unimpressive Q1 2021 results. It closed the month better, gaining a significant 100.71% of its opening price for the month, followed by Nahco’s 49.37% gain; while Ikeja Hotel chalked 41.75%; followed by Honeywell Flour’s 40.99%.
Low and medium cap companies dominated the top gainers for the month included: Oando 24.38%; Mansard, 24.08%; among others.
Worst Performing Stocks for April
The top losers table was led by Royal Exchange Assurance which shed 16.42%, on the back of selloffs and unimpressive earnings performance, just as profit taking and mixed sentiment dragged Multiverse down by 14.20%; while Eterna declined by 13.97%; Nigerian Breweries, 13.51%; and Courtville Business Solution, 12.50% on the back of delisting plans.
Worst Performing Stocks in April 2023
Technical View on Monthly Time Frame (See opening chart)
The NGX index’s action resisted further decline technically in the month of April as it formed a bullish hammer candlestick that support reversal and uptrend depending on market forces in the new month. The renewed buying interest and positive sentiment for the financials are likely to continue. The inflow to equity assets as revealed by daily time frame money flow index supported the seeming reversal on smart money reposition their portfolios.
Where To Invest For the Rest of Q2
The global economy and stock markets remain mixed as fear of recession, rate hikes by central banks of the western world and increasing geopolitical tension had continued to drive volatility in the midst of escalating Ukraine and Russia conflict.
Back home, the seeming economic recovery and mixed indicators are likely to continue in the new month as we expect moreeconomic data and the events to confirm the real state of the nation’s economy as implementation of the 2022 and 2023 national budget run side by side.
In May, we expect the release of April consumer price index (CPI) by the National Bureau of Statistics (NBS) that would likely show that inflation is rising further or moderating; just as the CBN’s Purchasing Managers Index (PMI) for April is equally expected in this May. The nation’s GDP is also expected this month and would confirm the true state of the economy.
As the corporate earnings reporting season has been extended to May and June for the few March year-end accounts, the fundamentals of these earnings and dividend declaration will support the ongoing positive outing in market. Also, we note that many high cap stocks have this month as their qualification and mark down dates, a situation that will keep the market oscillating and at the same time support recovery. When earnings rise, stocks rise, also, when earnings fall stocks fall, the correlation is very strong. This Q1 earnings season confirmed that corporate earnings should start moving higher now, if they do, then stocks will rise too. These better than expected numbers provide an all clear buy and sell signal for the stock market
Traders and investors who understand the importance of combining fundaments and technical analyses in making investment decisions in the stock market should take this opportunity to position in some sectors for medium and short-term gains, especially the banking, telecom and insurance after a carefully study of recent numbers beingmade available to the market.
What to expect in May and June
• Release of more quarterly and full-year earnings. Earnings from blue-chip companies may strengthen market fundamentals in May.
• Continuation of oscillating trend of equity prices as a result of repositioning of portfolio along the line of positive numbers and profit taking. Also the second half of this year will likely be dominated by mixed sentiment.
• Market outlook for May is mixed but remain dicey, in line with popular saying that traders always “sell in May and come back in October,” which may not be applicable in the current trend of our market that has changed in the last five years. In the Nigerian market, the month of May has closed positively in 15 times over the 24 years. But with the impressive Q1 numbers so far; the oil price oscillating above $78 per barrel in the global market.
• The sustained low valuation in the market may trigger high demand for stocks as players realign their portfolios. However, there is need to invest wisely, using bids, offers and volume when taking decisions as a trader.
• Managing risks and protecting capital at this point is very important, so you will determine when to buy or sell, by watching the stocks and the market, using technical analysis. Look for investdata daily sentiment timing report and investment education home study video packs
• Let numbers released by the companies guide your decision and time to stay in that position.
• Full-year earnings reports of March year-end companies will start hitting the market this month until June.
As the market phase is changing, it is time to combine fundamentals and technical tools to take decision by knowing the support and resistant levels to reposition or exit any position. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08028164085.
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