Mixed Sentiments Ahead, As Investors Expect Economic Agenda, Policy Directions From New Govt

Market Update for the Week Ended May 26 and Outlook for May 29- Jun 2

The last full trading week on the Nigeria Exchange May closed on a bullish note amidst high hopes concern the incoming administration which boosted position taking in the equity space, as investors and analysts digest the impact of the recent macroeconomic reports, rate hike and mixed outlook in fixed income market yields as rate across the three tenor in the last TB primary market auction decline to 2.47%, 4.99^ and 7.99% respectively for 91days, 182 days and 364 days.
The NGX appeared to have broken out its recent resistance level of 52,684.60 basis points on increasing buying interests and positive momentum as market players’ expectations from the incoming administration boosted confidence in the midst of improving fundamentals and economic concerns. In the midst of these, discerning investors and traders continued to reposition their portfolios as sectorial rotation persists to play defensive and protect their trades.
All eyes were on the May 29 handover and expected policy statement or direction of the new government, particularly in its first 100 days in office, as well as appointments of economic managers that will drive strong economic progress with production oriented policies and proper debt management at a time 94% of the nation revenue is devoted to debt servicing. There is need for total change in governance and cost management strategy to avoid the Ghana situation in Nigeria. It is true that the latest Q1 GDP recorded slowdown in growth to 2.31%, but some sectors contributed to this growth. As such, investors should look the way of these sectors and industries. The increasing bargain hunting and insiders’ dealings has reflected in the high transaction volume and volatility now supporting market recovery.
Technically, the low price attraction due to dividend adjustment should attract inflow of funds into the market in the short to medium term on the back of the expected confidence boost from the incoming government and economic resilience in the face of increasing headwinds. Also noteworthy is the fact that Q1 corporate earnings reports were better than expected, and currently supporting the ongoing insider dealings, as majority shareholders increase their stake to defend their position.
Last week too, more companies notified investors of insiders dealing and transactions, especially from UBA, Zenith Bank, McNichols, Nestle and others, a situation that suggests that these board members and top management are seeing inherent value in their companies hence their repositioning. This should guide investors and traders as they watch the market and take investment decisions.
During the week, Conoil presented its 2022 full-year earnings report alongside the belated numbers for the Q1 ended March 31, 2023 which looks good, as well as corporate action for the 2022 financial year, offering dividend of N2.50. Also, Cutix and Nigerian Enamelware released their unaudited full year accounts for the period ended April 30, 2023, while the share prices of Multiverse and ETI were adjusted for dividend of 5 kobo and 51 kobo respectively as recommended by their directors. Portfolio rebalancing and positive sentiment continue to reflect on the market breadth for the period, as more companies recorded capital gain for the week.
Bargain hunting and position taking among highly priced stocks like Nestle, Geregu Power, MTN Nigeria and other blue chip companies pushed the benchmark index higher. The NGX’s Price-to-Earnings ratio remains relatively low and attractive for investments, following which we foresee a mixed trend in the last month of Q2 and beyond on profit booking and buying interests. Investors expect the new government to boost confidence by putting in place the right polices that would provide a direction for the economy and aid investors planning and projections.
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 rebounded to trade at $76.95 per barrel on OPEC meeting and possible output cut in the midst of debt ceiling resolution underway, in the face of global mixed macroeconomic reports 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
The NGX All Share index had a bullish performance during the week, recording four trading sessions of up market and one down due to profit taking in blue-chips, halting two weeks of bear run and breakout of the consolidation ranges on an above-average traded volume and positive market breadth.
The NGXASI is currently trading above the T line and 50 DMA on the daily and weekly charts, revealing a rekindled confidence and position taking on the back of impressive Q1 numbers and high dividend yields, alongside buy opportunities presented by the undervalued state of the state of the market. This supported market recovery as the NGX index rose on a buying sentiments, ahead of the release of more March year and quarter-end accounts and other factors that now make the market attractive for technical traders as they keep their eyes on volume, strong support and resistance levels.
Trading during the week started on a positive note, extending the gains recorded in the previous session as the composite index gained 0.25%, this was sustained on Tuesday and midweek as the NGX index inched up by 0.45% and 0.58% respectively, before pulling back on Thursday as profit taking hit some stocks to record loss of 0.20%. The benchmark index, however retraced up by 0.29% on Friday. This brought the week’s total gain to 1.51%, from the previous week’s 0.05% negative position.
Consequently, the benchmark NGXASI gained 785.95 basis points, closing at 52,973.88bps from the previous week’s 52,187.93 points level. Within the period the index touched an intra-week high of 52,991.18bps, from its lows of 52,145.28bps. Similarly, market capitalisation rose by N428bn, also representing a 1.51% appreciation in value at N28.85tr, from the previous week’s N28.42tr,
The week’s top advancers table was dominated by low and medium cap stocks amid accumulation and positive sentiment in blue chip companies and undervalued stocks while volatility and portfolio repositioning continued. Also notable was the increased buying interest in some stocks based on their audited full-year and Q1 results from different sectors that 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, as the market’s recovery and uptrend was sustained, heading for 53,000 and 53,142.86 levels again.
The decliner and advancer line for the period revealed a positive breadth as gainers outnumbered losers in the ratio of 60:21 on a buying sentiment as indicated by investdata sentiment report showing 98% ‘buy’ volume and 2% sell position. Money Flow Index looking up to read 41.53bps, from the previous week’s 36.19points, an indication that funds entered the market on a weekly chart to reflect position taking in highly priced stocks and some sectors of the market, in the face of MPR hike, slow growth in Q1 GDP and mixed outlook for fixed income market yields.
The NGX index’s action broke out from its recent consolidation ranges to trade above the 50 DMA and T line on above average 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. Just as the candlestick formation indicates that buyers are still in charge due to expectations.
Buying sentiments as the NGX index traded above its 50 and 100-Day moving average signal the presence of institutional investors in the market, as accumulation is ongoing in some stocks and increasing level of liquidity on dividend payment will support continuation of uptrend. We note that the volume which supported this recovery and uptrend remains mixed and above the market’s traded average, just as reaction to the expected results and others could support reversal or continuation at this level.

Bullish Sectoral Indices
The sectorial performance indexes for the week were green, save for the NGX Industrial goods that closed 0.70% in the red, while the NGX Banking led the advancers after gaining 5.63%, followed by Energy, Insurance. and Consumer goods with 3.59%, 3.24% and 3.10% respectively.
Activities in volume and value terms were mixed, as investors exchanged 1.96bn shares worth N33.90bn, compared to the previous week’s 3.03bn units valued at N33.63bn. Volume was driven by Financial services, Conglomerates and Consumer goods stocks, boosted by trading UBA, Accesscorp, Zenith Bank, Transcorp and Dangote Sugar.
FTN Cocoa and RT Briscoe emerged the best-performing stocks for the week, after gaining 54.55% and 40.74% respectively, closing at N0.68 and N0.38 per share on market sentiment. On the flip side, Sovereign Trust Insurance and Chellarams had lost 20%and 18.78% respectively, at N0.36 and N1.47 per share, purely on profit taking and selloffs,

Outlook for the week
We expect mixed sentiments and profit taking in the midst of expected policy statement, economic agenda by the new administration and post transition realities, as corporate actions provide price adjustment and payment dates. However, retracement to the 52,578.12 level and below is possible on profit taking as global and domestic events unfold.
Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605