Mixed Sentiments Ahead, Amidst Profit Taking, Cautious Trading, Portfolio Realignment

Market Update for June 1

The positive sentiment on the Nigerian Exchange continued on Thursday, as the trading for the last trading month of Q2 began with a marginal gain, as the benchmark NGX All-Share index extended its bullish momentum for the fourth consecutive session. It traded at the critical level of a breakout or fake out in the midst of a positive market breadth, and low traded volume that is on the decline from the high volume of transaction on Tuesday.
The index action and chart pattern on a daily, weekly and monthly time frame is showing a double top reversal pattern, with many stocks on the exchange hitting new 52-week high, the possibility of a market correction or pullback is high, depending on market forces. Also, the market hit a 16-year high, despite the dicey outlook for the month of June that has been a period of profit taking and selloffs for portfolio repositioning ahead of the half-year earnings reporting season in July.
The NGX maintained a positive trend even as it ranges in the face of the belated earnings made available by FBN Holding with the directors offering 50 kobo dividend on a mixed performance as revealed by the company’s scorecard. More companies are expected to announce their Annual General Meetings details on the exchange, as their dividend payment dates draw near. These supported the ongoing dividend income reinvestment in the market arena that had equally enhanced liquidity in the equity space, coupled with the better-than-expected Q1 numbers. They should guide investors on how to reposition their portfolios ahead of Q2 earnings reporting season, as quoted companies started notifying the exchange and investing public of their closed period and board meeting dates to approve first half financials. Also, all eyes are on audited financials of March year-end companies.
The market is currently trading above its 50-Day Simple Moving Average and 100DMA after the golden cross on the daily and weekly chart, while heading to breakout 56,000 basis points level, as the market expect more policy guideline and direction from the new administration. This calls for caution and profit taking, so let technical traders and discerning investors be guided, because higher prices will lead to low 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. Market volatility remains at the extreme on positive sentiment as T-line turned support for index action ahead of the next market forces and statement.
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Oil price oscillation continued, rebounding to trade at $75.07per barrel in the midst new senate passing debt ceiling bill ahead of OPEC meeting next week, even when fear of fed rising rates again in June, in the face of China economic recovery remain mixed in the midst of central banks rates hike that is driving economic contraction. Just as Ukraine and Russia war continued. This is in addition to rising geopolitical tension 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.
Thursday’s trading started slightly in the downside but rebounded to oscillate throughout the session, on positioning in blue chip stocks and others a situation that pushed the NGX All-Share Index to an intraday high of 55,732.68bps, from its lows of 55,713.60ps, before closing marginally above it opening figure at 55,808.25 point
Market technicals were positive and mixed with a lower 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 79% buy position and 21% sell volume. The total transaction volume index stood at 0.59 points, just as momentum behind the day’s performance was strong, with Money Flow Index reads 90.54pts, from the previous day’s 85.00pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Thursday’s trading, the composite NGXASI gained a marginal 38.97bps, closing at 55,769.28bps, from its 55,808.25bps opening level, representing a 0.07% up, just as market capitalization rose by N21.21 billion to N30.39tr, from the previous day’s N30.37tr, which also represented a 0.07% value gain.
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Meanwhile, Thursday’s upturn was driven by accumulation in the shares of Conoil, Berger Paints, MRS Oil, Ikeja Hotel, Zenith Bank, GTCO, UBA, Accesscorp, Total, Geregu, Eterna and Sterling NG among others, which impacted positively on Year-To-Date gain that increased to 8.89%. Market capitalization YTD gain went up to N2.39 trillion, representing 8.86% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed higher, except for NGX Consumer Goods that closed 0.26% lower, while the NGX Energy led the advancers after gaining 2.27%, followed by Insurance and Banking with 1.11% and 0.95% respectively. Just as NGX Industrial goods closed flat.
Market breadth was positive as gainers outpaced losers in the ratio of 31:19, while activities in volume and value were down after players traded 390.22 million shares worth N5.73bn, driven by trades in, Accesscorp, UBA, FTN Cocoa, Zenith Bank and GTCO.
Conoil and SterlingNG were the best performing stocks, gaining 9.92% and 9.76% respectively, closing at N63.70 and N2.25 per share, on positive earnings and market forces. On the flip side, FTNCocoa and Champion lost 9.88% and 9.62% respectively, closing at N0.73 and N3.76per share, purely on profit taking.

Market Outlook
We expect the mixed sentiments to continue in the midst of profit taking and cautious trading, as portfolio realignment persists in the face of expectation of more policy guideline of the government, even when dividend reinvestment supports market 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 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