Market Roundup for Q1 2023
Trading on the Nigerian Exchange in the first quarter of 2023 was bullish with mixed trends, as the market defied the impact of the rates hike in the first two meetings of the Central Bank of Nigeria (CBN) Monetary Policy Committee, as well as election related uncertainties, at a time of a global fear of recession made worse by the raging geopolitical tensions. The benchmark NGX All-Share index closed higher on the strength of an increase in local investor participation, as foreign investors that left the market in 2020 continue to watch from the sidelines at a time of stronger corporate earnings in the face of mixed dividend payout and high volatility. The rally within the period was also supported by price appreciations in high cap stocks like Geregu Power, among others.
The pullbacks and mixed trend witnessed, particularly in the last month of the quarter and after the general elections resulted from profit taking and portfolio reshuffling ahead of Q1 earnings expectations in second quarter of the year, when power will expectedly by transferred to the incoming government. Already, all eyes are on the possible policy shift and reforms expected from the income government of Asiwaju Bola Ahmed Timubu.
Despite, the mixed interest rates and yields in the fixed income space, market players are still looking the way of the stock market in search of higher returns to hedge against the soaring inflation. Within the period also, trading on the exchange maintained the second straight quarter of bull-run on a very high traded volume and positive sentiment, irrespective of the cash crunch that halted economic activities which led to purchasing manager index contracting in February.
As such, the index recorded a robust 8.35% gain, which was sustained in the early days of the month of March, before reversing on selloffs, profit taking and panic trading as a result of global banking crises that triggered fear of recession on concerns for the ongoing central banks of the world rate hikes in the name of checkmating inflation at the detriment of economic activities.
Consequently, the benchmark index lost 2.82% in the month of March, slowing down the quarter and YTD gain to 5.82%, while ushering in the Q2 season, with mixed outlook on the quarter, as 2023 first quarter earnings reports are expected to be mixed in this new month.
The mixed sentiment, slowing momentum and the uptick in yields in the fixed income market combined to slowdown the NGX’s All-Share index and trigger sectoral rotation, thereby creating buy opportunities for discerning investors and technically inclined traders. The market enters its distribution phase after breaking down the 55,000 basis-point strong support in the month of March when the index lost 2.82% after price adjustment for dividends from Ucap, NB, MTNN, Dangote Cement and others in the period.
First quarter upbeat occurred on positioning and high traded volume, when compared to transactions recorded in the last quarter of 2022, amid the influx of corporate earnings to the market with better than expected earnings and mixed dividend news that translated to better dividend yields, despite huge cost production and living.
During the period also, there were high volatility and commodity prices like premium motor spirit or petrol, AGO and other energy products, a situation that put inflationary pressure, despite the oscillating price of crude oil in the international market. The expected Q1 numbers will give further insights, being a leading index or parameter that tells what is happening in the economy and where it is headed.
The benchmark index closed for the quarter on a positive note, the loss recorded on the last trading day of the quarter suggests a reversal or continuation of trend with the market yet to respond to the last-hour rush to release numbers and corporate actions, due to relatively low liquidity in the market and the wait-and-see attitude of investors and traders ahead of handover date to the new government.
As noted earlier, the audited scorecards of various listed companies released so far have given insights into what we should expect from different sectors and individual stocks, considering the impact of the cash crunch on the economy. There is a possibility of prices reversing up and down, amidst portfolio rebalancing on the strength of the 2022 full-year numbers and expected Q1 earnings reports in April.
In the 63 trading sessions of the quarter, the NGX All-Share index recorded gains in 38, and was down in 25, resulting in a cumulative 5.82% gain, which happened, owing to price appreciations by high cap stocks in February and high dividend yields that attracted more inflows to the market.
Specifically, in the first quarter of 2023, the NGXASI gained a total of 2,981.28 basis points, closing at 54,232.34bps, compared to the 51,251.06bps at which it opened, after touching high of 55,985.47 bps and 50,830,51bps lows. There was a buying pressure and mixed sentiment within the period, which impacted positively on the index and stock prices, pushing them higher to breakout various resistance levels and psychological lines.
Market capitalization, during the period, rose by N1.63tr, closing at N29.54tr, from N27.92tr, representing a 5.84% appreciation in value. The quarter’s total ‘sell’ volume was 22%, leaving ‘buy’ position at 78%, extending the previous quarters of bull transition, while volume index for the period was 0.86.
Transaction volume for the period was up by 50.85% as investors exchanged 16.82bn shares, compared to the previous 11.15bn units, just as market breadth for the period was positive with gainers outnumbering losers in the ratio of 68:27. It therefore extended the preceding quarters of up market as liquidity was mixed in equity assets due to factors mentioned above, a situation that may reverse in Q2 as the earnings season extends to April in expectation of 2023 Q1 numbers.

Bullish Sectorial Performance
Performance indexes across the sectors and market closed green, with the NGX Growth index leading the advancers after gaining 55.66%, followed by Consumer goods, Premium, Oil/Gas, Banking, Pension, NGX 30, Industrial and Insurance with 19.12%, 11.97%, 10.45%, 8.50%, 6.35%, 4.93%, 2.21% and 1.81% respectively, despite the profit taking and selloffs in the last month of the quarter.
Others are represented in the chart below, revealing investors’ mixed sentiment and indecision among traders, as the market’s Price-To-Earnings Ratio closed below 12x.

Best And Worst Performing Stocks For Q1
The best-performing stocks for the quarter under review were predominantly low, medium and high caps across the Insurance, Energy, Oil/Gas, Services, Consumer Goods, banking and industrial sectors, led by Tripple Gee, which gained 241.77% as a result of market sentiment and turnaround in the company. International Energy Insurance gained 158%; and the 117.81% notch by John Holt; just as Geregu Power climbed 116.78% up, on sentiment and personality behind the company; while Mrs Oil Nigeria chalked 98.23%; among others.

Best Performing Stocks in Q1

The worst performing stock was NCR, which lost 41.11%, amidst lack of earnings reports and market forces; followed by Royal Exchange Assurance’s 26.42% drop due to the unimpressive results that led to selloffs. United Capital’s share price declined by a further 20%, on a mixed numbers and price adjustment for dividend. Multiverse and Computer Warehouse Group lost 18.59% and 13.86% respectively.

Worst Performing Stocks in Q1

Technical View (Opening chart)

The NGX’s index action for the quarter was bullish, breaking out of the cup and handle chart pattern formation to signal uptrend, as the index rallied to breakout some strong resistance levels of 51.000, 52,000 and 54,000 marks in the midst of audited financial reports season before pulling back slightly in march on profit taking and panic selloffs. At the same time, it is trading above its 50-Day Moving Average on the monthly and quarterly chart, despite the seeming mixed sentiments and high traded volume.
The trading patterns and momentum going forward are likely to be mixed or change, as investors react to the audited full-year numbers, portfolio rebalancing and repositioning, with dividend news and Q1 numbers.
Market technicals for the quarter were mixed, a situation expected to change in the new month and quarter, which is a buying month and quarter as revealed by analysis of two decades old data by investdata Research. This is the situation, especially now that is a transition period to usher in new government. So trading environment is likely to change toward sector rotation, to allow players pinpoint hot stocks in different sectors with high upside potential and positive price actions.

Market Outlook
The mixed trend is expected to continue in the new month and quarter, even as market outlook remains mixed and dicey due to the rising inflation, mismatch in policies, high cost of production, change in government and concern over geopolitical tension, even as yields in the fixed income market is looking up. All eyes are on expected economic data and Q1 numbers in the new month, despite the rising inflation and weak economic activities.
Investors should at this point avoid greed and instead ensure that their decisions are guided by predetermined investment goals and exit strategies with stop loss in place in any trade decision. Again, the current market levels offer traders opportunities to position for the short-term, while investors should target fundamentally sound, and dividend-paying stocks for possible dividend income and capital growth now that many companies had made available their corporate actions to the market.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
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