Mixed Market Sentiments Ahead, Amid Portfolio Repositioning, Reactions To Suspension Of CBN Chief

Market Update for the Week Ended June 9 and Outlook for June 13-16

Trading activities on the Nigerian Exchange last week witnessed mixed sessions and trends amidst renewed market optimism on positive economic policy outlook from the new government, as well as profit taking from the recent gains recorded on the back of the rally driven by optimism arising from the inaugural speech of President Bola Ahmed Tinubu.
That notwithstanding the profit booking experienced during the period, however, the market sustained its weekly gains, even as it struggles to breakout the 56,000 mark on a mixed volume pattern and positive market breadth. The bearish divergence between the index action and momentum after forming double tops across the daily, weekly and monthly time frame is a sign that correction is underway as many stocks recently hit their 52-week high on a mixed volume pattern. Regardless of the expected pullback, the NGX index continued to trade above its big trend line since April 2020 on impressive performance of corporate actions.
At the current level of the market and continued sector rotation by market players as the reality of the fuel subsidy removal influencing some company’s performances and its impact on the economy negatively in the short-term, following which cost of living and production skyrocketed in recent time. With the market looking forward to more fundamental news in weeks to come, discerning investors and traders will continue to reposition their portfolios along companies with strong prospects for sustained positive performance, regardless of the economic situation due to the nature of their services and products. This is especially true of those that enjoy inelastic demand, like the banks and telecom giants.
Meanwhile, in the absence of other fundamental news and slowdown as foreign portfolio investors plough back their recent dividend payments into the market, there is the mixed outlook on fixed income yields as rates across the three tenor in the last TB primary market auction rose to 4.48%, 6% and 9.45% respectively for the 91, 182, and 364-day instruments. This is reflective of the latest Central Bank of Nigeria (CBN) benchmark Monetary Policy Rate of 18.50% in the face of rising inflation ow at 22.22%, thereby keeping returns in this window in the red, and way below the inflation rate.
The NGX appears to be at a critical level and distribution phase, pulling back after breaking out the strong resistance level of 55,984.67 basis points on mixed sentiments. We expect that all sides of the financial market would react Tuesday when trading open to the suspension of the CBN governor announced on Friday night. Already, the Naira has fallen to its lowest in the Investors and Exporters window since that Friday night.
Also, the outlook for the month of June remains mixed. But in the midst of these, discerning investors and traders continue to reposition their portfolios, going for defensive stocks to protect their trades, as sectorial rotation persists in a policy changing environment.
But on the strength of the latest suspension and arrest of the apex bank’s governor, Investdata expects cautious trading in the days ahead, especially before the 2023Q3 earnings reporting season.
Also, during the week many companies presented their Q3 earnings forecast to guide investors, while at the same time more companies notified the exchange of insiders’ dealings in their shares, especially Nigerian Breweries, McNichols, United Capital and others. This situation suggests these board members and top management staff are seeing inherent value in their companies, hence their repositioning therein. This should guide investors and traders as they watch the market and take investment decisions.
The belated Q1 earnings report of Coronation Insurance and Unity Bank were presented to the market and the numbers were mixed while the share prices of Cadbury, Skyway Aviation Handing Company, Cornerstone Insurance and UACN were adjusted for dividend of 0.40 kobo, 0.165 kobo, 6 kobo and 20 kobo respectively as recommended by their directors. Portfolio rebalancing and positive sentiment continue to reflect on the market breadth for the period, as more share prices appreciated in value during the period. Also noteworthy is the fact that the NGX’s Price-to-Earnings ratio remains relatively low and attractive for investments, following which we foresee a mixed trend in the rest of Q2 and beyond on profit booking and buying interests.
To navigate Q2 market volatility and the rest of the year mixed outlook 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 market correction. As volume of transaction witnessed within the week remain above the average traded volume, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
Oil price during the week continued its oscillation, as it pulled back to trade at $74.79 per barrel in the face of Saudi Arabia and US trading threats over oil. Also, the fear of rate hike by Fed in the midst of global macroeconomic reports mixed and rising geopolitical tensions across the globe and supply disruptions due to the Russia-Ukraine war that has lingered for more than a year now, and is indeed escalating. The up and down movement of oil prices also continues to drive volatility across different investment windows.

Movement Of NGXASI
It was a bearish week, as the index was down in four trading sessions and up on a single day, with the benchmark NGX All-Share index sustaining its weekly gains for three straight weeks in the midst of a ranging market and profit taking on above average traded volume and positive market breadth.
The week’s trading started on a negative note, halting the previous gain as the benchmark index lost 0.03%, but retraced up on Tuesday with a 0.42% gain to cross the psychological line of 56,000 before pulling back at midweek with 0.07%. This was sustained for the rest of the week with 0.07% and 0.05% respectively on Thursday and Friday. This brought the week’s total gain to 0.20%, compared to the previous week’s 5.37% positive position.
Consequently, the composite index NGXASI gained a cumulative 110.47 basis points, closing at 55,930.97bps from the previous week’s 55,820.40 points level. Within the period the index touched an intra-week high of 56,089.52bps, from its lows of 55,361.68bps. Similarly, market capitalisation rose by N60 billion, also representing a 0.20% value gain at N30.46tr, from the previous week’s N30.40tr.
The week’s top gainers table was dominated by low and medium cap stocks amid profit taking and positive sentiment in the kobo and other undervalued stocks, while volatility and portfolio repositioning continued. Also notable was the increased buying interest in energy stocks based on market sentiment and expectation of fuel subsidy removal impact on their bottom lines, just as Q1 results from different sectors had revealed value in some companies with strong volume patterns. So buying into value, strong earnings and high dividend yield companies remain the way to go.
Market breadth for the week was positive as gainers outpaced losers in the ratio of 52:27 on a buying sentiment as revealed by investdata sentiment report showing 78% ‘buy’ volume and 22% sell position. Money Flow Index looking up to read 47.50bps, from the previous week’s 45.33points, an indication that funds entered the market on a weekly chart to reflect position taking in blue chip stocks and some sectors of the market, in the face of mixed outlook for fixed income market yields and the month of June.

The NGX index’s action has formed a double top across various time frames to signal reversal underway or a breakout to trade above the 50 DMA and 100 DMA on a high traded volume to rally on a weekly time frame that supports an uptrend or pullback, which need to be confirm in the new week as pending financials are expected in the market. Also, the candlestick formation indicates that buyers are still in charge due to expectations ahead of another earnings reporting season around the corner.

Bullish Sectoral Indices
The sectorial performance indexes for the week were bullish, save for the NGX Industrial goods that closed lower by 1.31%, while NGX Insurance led the advancers after gaining 13.91%, followed by Energy, Banking and Consumer goods with 3.39%, 1.10% and 0.14% respectively.
Activities in volume and value terms were slightly down, as market players exchanged 2.20bn shares worth N45.97bn, compared to the previous week’s 2.59bn units valued at N46.64bn. Volume was driven by financial services, Energy and Consumer Goods stocks, boosted by
trading UBA, FCMB, NPF Microfinance, Eterna and Transcorp.
Eterna and Unity Bank emerged best-performing stocks for the week, after gaining 45.41% and 44.00% respectively, closing at N13.45 and N0.72 per share on positive market sentiment for oil sector and market forces. On the flip side, John Holt and RT Briscoe had lost 26.70% and 10.53% respectively, at N1.40 and N0.34 per share, purely on profit taking and selloffs,

Outlook for the week
We expect mixed sentiments and bearish outing as market players reposition their portfolios ahead of new bond issuance and reaction to the CBN’s governor suspension in the midst of expected policy guideline and implementation, as corporate actions provide price adjustment and payment dates. However, retracement to the 54,578.12 level and below is possible on profit taking as global and domestic events unfold.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605