Mixed Sentiments Ahead, Amid Positioning, Profit Booking, As Investors Reassess Upside Potentials Of Stocks

Market Update for June 19

The first trading session of the week on the Nigerian Exchange had a mixed session of profit taking and bullish sentiment, driven by position taking in highly priced stocks and blue-chip companies such as Dangote Cement, GTCO, Zenith Bank and Accesscorp, among others. This pushed the benchmark NGX All-Share index slightly higher, thereby halting the previous day’s losses on a very high traded volume and positive market breadth.
Market players have continued to digest the policy directions of the government on the economy and financial market, as well as sociopolitical reset is ongoing to put the nation on a progressive path. Also, the new government is following through its policy statement, even as the market awaits further guidelines, strategies and agenda to achieve all that were promised to a new hope.
Monday’s market performance remains above the 59,000 mark, despite the nixed sentiments of profit taking and buying interests during the session, with the index still at its 16-year market high on a very high volume of transaction. In the process, many stocks hit new 52-week highs on strong buying sentiments and an expected fall in interest rates as the government looks to reform monetary policy after the recent unification the foreign exchange rates.
The major sectors of the market witnessed a buying interest on the inflow of funds as investors and traders took position in low, medium and high cap stocks, even as many company’s dividend yield become lower yet, ahead of the Q2 earnings reporting season. This is as more quoted companies notify the exchange and investors of their closed periods and board meeting dates to approve the half-year financials. Also, all eyes are on audited financials of March year-end companies.
The NGX is currently trading above its 100-Day Simple Moving Average and 200DMA on the daily and weekly chart, while heading to the 60,442 basis points level again, with more stocks making new highs on the positive sentiment towards government economic and financial market reforms. This calls for a change in trading strategies and caution, amid the possibility of profit taking and correction. As such, technical traders and discerning investors must be guided, because higher prices will lead to lower dividend yields, even when market Price to Earnings Ratio is relatively low. It however provides better opportunities for investors to hedge against inflation even when fixed income market yields look attractive and remain mixed in the face of high inflation.
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Oil price oscillation continued Monday, rebounding again to trade at $76.17per barrel in the midst of rumored economic stimulus in China and possibility improved geopolitics to support global economic recovery. Even as the Russia-Ukraine war remain a concern, the prevailing high interest rate regime and slowing inflation. 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, Monday’s trading opened slightly in the upside and was sustained throughout the session, despite oscillating on positioning across the sectors and profit booking, a situation that pushed the NGX All-Share Index to an intraday high of 59,227.72bps, from its lows of 58,925.92ps, before closing marginally above it opening figure at 59,016,12 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 selling sentiment as revealed by Investdata’s Sentiments Report showing 30% buy position and 70% sell volume. The total transaction volume index stood at 1.43 points, just as impetus behind the day’s performance was strong, with Money Flow Index reads 83.90pts, from the previous day’s 78.56pts, indicating that funds entered the market.
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Index and Market Caps
At the end of trading, the composite NGX All-Share Index inched up by a marginal 15.16bps, closing at 59,016.72bps, from its 59,000.96bps opening level, representing a 0.02% growth. Market capitalization rose by N7.6bn to N32.13tr, from the previous day’s N32.13tr, which also represented a 0.02% value gain.
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Monday’s upturn was driven by high demand for stocks like Dangote Cement, BUA Foods, Zenith Bank, GTCO, UBA, Accesscorp, Ikeja Hotel, Wapic, Lafarge Africa, Dangote Sugar and FTN Cocoa, among others. This impacted positively on Year-To-Date gain, which increased to 15.15%, while Market Capitalization YTD gain went up to N4.38tr, representing 15.12% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed in the green, led by NGX Banking which gained 2.9%, followed by Insurance, Industrial and Consumer goods with 1.2%, 0,7% and 0.1% respectively. while NGX Oil/Gas closed flat.
Market breadth was positive as gainers outpaced losers in the ratio of 43:22, while activities in volume and value were up after players exchanged 782.5m shares worth N11.10bn, driven by trades in, Jaiz Bank, Universal Insurance, GTCO, UBA and Wapic Insurance.
Tantalizer and Universal Insurance were the best performing stocks, gaining 10% each, closing at N0.22 per share each on positive market forces and sentiment. On the flip side, Ellah Lakes and John Holt lost 10% and 9.6% respectively, closing at N3.24 and N1.04per share, purely on profit taking.

Market Outlook
We expect mixed sentiments on positioning and profit booking, as players continue to reassess the upside potentials of stocks and realign their portfolios, just as more policy pronouncements and appointments to give direction. Also, Q2 earnings reporting season draws closer to confirm the real state of the company performance and attract liquidity in the midst of markdown dates 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. 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