Mixed Sentiments Ahead On Buying Interests, Profit Taking, As Dividend Payouts Support Liquidity

Market Update for May 16

The positive sentiments and buying interest on the Nigerian Exchange continued Tuesday, with the composite NGX All-Share index closing higher on a low traded volume and positive market breadth, thereby extending the bull transition for a third consecutive session amidst prevailing value in the equity space and positive outlook in the medium term.
As a result of corporate earnings performance that beat the 22.22% April inflation figure, signaling the potential of these companies’ numbers supporting their share prices and higher payout at year end. With all eyes are on the expected Q1 GDP report and outcome of this month’s Monetary Policy Committee meeting, investors are conscious of the fact that there are less than 14 days to the inauguration of a new administration which is believed to be pro-market and economy, while driving development to enhance the living standard of Nigerians. These factors are likely to impact the market and drive positive sentiment on the back of policy statements and appointment of economic managers to support the renewed hope.
Positive sentiments and accumulation in blue chip companies continues to impact the market positively as players ploughs their dividends back to the market a situation that had supported flow of funds into the equity space as revealed by money flow index and candlestick formation at the end of the day’s trading. Also, the market awaits March year-end companies audited financials.
The consolidating phase or ranging market calls for caution while at the same time looking at fundamentally sound stocks and future growth prospects, considering the various sectors and current prices. The prevailing low prices of many stocks due to their recent adjustments for dividend which has made them attractive for new entry and repositioning of portfolios in the midst of high inflation and improving economic activities despite the high cost of funds.
As the 20-Day Simple Moving Average remains a strong support level on the daily chart. This should guide technical traders and discerning investors, based on the dividend yields and low market Price to Earnings Ratio that provides better opportunity for investors to hedge against inflation even when fixed income market yields look attractive and remain mixed.
Also, there is the uncertainty of a rate crash as the incoming government moves to drive economic growth and development, even as we note the suspension of the planned removal of fuel subsidy and postponement of the population census, signaling the possibility of a policy shift. These may be a plus for the equity market on a likely financial market and economic reset. Market volatility remains at the extreme on positive sentiment as T-line turned support for index action ahead of the next market forces and positive statement.
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Oil price oscillation continued, pulling back to trade at $74.48 per barrel in the midst build up inventory and mixed China economic recovery reports in the face of central banks rates hike that is driving economic contraction in the face Ukraine attack. 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 war that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Tuesday’s trading opened in the green and was sustained throughout the session, on buying interests in financial services and consumer goods stocks, a situation that pushed the NGXASI to an intraday high of 52,436.45 basis points from its lows of 52,231.29ps, before closing above its opening level at 52,419.33bps.
Market technicals were positive and mixed with 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 92% buy position and 8% sell volume. The total transaction volume index stood at 0.89 points, just as energy behind the day’s performance was strong as Money Flow Index reads 81.45pts, from the previous day’s 81.38pts, indicating that funds entered the market.
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Index and Market Caps
The NGX All-Share Index at the end of Tuesday’s trading gained 188.04 basis points, closing at 52,419.33bps, from its 52,231.29bps opening level, representing a 0.36% growth, just as market capitalization rose by N103bn to N28.54tr, from the previous day’s N28.44tr, which also represented a 0.36% appreciation in value.

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The day’s upturn was driven by position taking in the shares of GTCO, PZ, NEM, Mansard, NB, Wapco, CAP, NCR, Transcorp, UACN and Nahco among others, which impacted positively on Year-To-Date gain which increased to 2.28%. Market capitalization YTD gain inched up to N226.18bn, representing 2.25% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes were in green, save for the NGX Oil/Gas that closed 0.71% lower, while the NGX Insurance led the advancers after gaining 3.19%, followed by Banking, Consumer and Industrial goods with 1.10%, 0.85% and 0.06% respectively.
Market breadth was nonetheless positive as gainers surpassed losers in the ratio of 27:18, while activities in volume and value were mixed after players transacted 576.85m shares worth N6.79bn, driven by trades in UBA, Transcorp, Accesscorp, Zenith Bank and FBNH.
Nigerian Breweries and FTN Cocoa were the best performing stocks, gaining 9.97% and 9.68% respectively, closing at N35.30 and N0.34 per share, on market forces. On the flip side, CWG and Courtville Business Solutions lost 9.63% and 6.52% respectively, closing at N1.69 and N0.43per share, purely on profit taking.

Market Outlook
We expect mixed sentiments to continue on buying interests in value stocks and profit taking, as payments for dividend to support market liquidity, just as investors reposition their portfolio ahead of markdown dates, Q1 GDP, MPC meeting and dividend payments.
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