Mixed Sentiments Ahead On Portfolio Realignment, As Investors Digest Macroeconomic Data
Market Update for May 25
Profit taking resurfaced on the Nigerian Exchange Thursday, as market players continued to interpret the recent macroeconomic reports and impact of the further upward adjustment in Monetary Policy Rate by the Central Bank of Nigeria (CBN) in the midst of increasing optimism ahead of Monday’s swearing in of a President. Investors remain focused on fundamentally sound stocks that had pulled back after being markdown for dividend, making them to appear cheap and attractive.
These classes of equities continue to attract inflow of funds as many companies announced their dividend payment, even as many more announce their Annual General Meetings details on the exchange, as their dividend payment dates draw near. This is supporting the ongoing dividend income reinvestment in the market arena that had equally enhanced liquidity in the equity space. Despite the topping pattern that support profit taking or selloffs, the better-than-expected Q1 numbers, should guide investors on how reposition heir portfolios ahead of Q2 earnings reporting season.
The NGX All-Share index pulled back to trade at 52,821.64 basis points after breaking out to 52,927.60bps on profit booking and mixed sentiment, thereby halting the four consecutive sessions of bull transition on a low traded volume and flat market breadth. Profit taking was across the major sectors save for oil and gas, amidst profit taking and buying interest in some value companies that continued as investors accumulate position for medium and long view. Also, all eyes are on audited financials of March year-end companies.
The market currently trades above its 20-Day Simple Moving Average and is flat on the 50DMA after the golden cross was short lived by the pullback on the daily chart, while heading to 52,684 level. As market digest the outcome of the CBN’s policy meeting and Q1 GDP data. This calls for caution, but should guide technical traders and discerning investors, based on the dividend yields and low market Price to Earnings Ratio that provide 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, as it pulled back again to trade at $76.14per barrel in the midst short seller flooring the market and fear of US debt ceiling default. As China economic recovery remain weak in the face of central banks rates hike that is driving economic contraction in the midst Ukraine and Russia war. 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.
Meanwhile, Thursday’s trading opened slightly in the downside and was sustained throughout the session, despite oscillating on profit and position taking in blue chip stocks, a situation that pushed the NGX All-Share Index to an intraday low of 52,723.15bps, from its highs of 52,928.28ps, before closing below it opening figure at 52,821.64 point
Market technicals were negative and mixed with lower volume traded when compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 48% buy position and 52% sell volume. The total transaction volume index stood at 0.57 points, just as momentum behind the day’s performance was strong, with Money Flow Index reads 82.77pts, from the previous day’s 82.99pts, indicating that funds left the market.
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Index and Market Caps
At the end of Thursday’s trading, the composite NGXASI shed 105.96bps, closing at 52,821.64bps, from its 52,927.60bps opening level, representing a 0.20% drop, just as market capitalization fell by N57.70bn to N28.76tr, from the previous day’s N28.82tr, which also represented a 0.20% value loss.
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Thursday’s downturn was driven by profit taking and selloffs in the shares of Geregu, Conoil, Unilever, PZ, Eterna and LASACO among others, which impacted negatively on Year-To-Date gain, reducing it to 3.06%. Market capitalization YTD gain slowed down to N575.24bn, representing 3.03% above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes closed in red, except for the NGX Banking and Oil/Gas that chalked 1.06% and 0.23% respectively, while the NGX Consumer Goods led the decliners after losing 0.14%, followed by Insurance and Industrial goods with 0.08% and 0.07% respectively.
Market breadth was at par as gainers were equal to losers in the ratio of 22:22, while activities in volume and value were mixed after players exchanged 377.14m shares worth N9.18bn, driven by trades in UBA, Accesscorp, Zenith Bank, GTCO and Geregu Power.
FTNCocoa and Tantalizer were the best performing stocks, gaining 8.77% and 8.33% respectively, closing at N0.62 and N0.26per share, on market forces and sentiment. On the flip side, Conoil and Unilever lost 9.92% and 8.28% respectively, closing at N43.60 and N14.40per share, purely on profit taking.
We expect mixed sentiments to continue on profit taking and portfolio realignment as investors digest the latest macroeconomic data and MPR, 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.
CRO|Investdata Consulting Ltd
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