Mixed Sentiments Ahead On Profit Taking, April Inflation Data, Reactions To Q1 Earnings

Market Update for the Week Ended May 12 and Outlook for May 15-19

Last week was the first full trading week of May on the Nigerian Exchange and the benchmark NGX All-Share index recorded a mixed performance, side-trending in the face of pullbacks amidst selloffs and profit taking among some highly priced and blue chip stocks that rallied just recently, forcing the market to close lower. The bull trend in a bear and recovering market has been strong as liquidity returns to the financial market following maturity of instruments at a time companies continued to pay juicy dividends, added to the inflow of Q1 corporate earnings that mostly beat expectations.
At the same time, all eyes are on April macroeconomic data such as the Consumer Price Index expected ahead of this month’s Central Bank of Nigeria Monetary Policy Committee (MPC) meeting, as well as the May 29 handover to the new administrations at the federal and state levels, for which plans are in top gear.
The outcomes of these data and events are likely to boost confidence, especially if inflation rate slowdown and the benchmark Monetary Policy Rate is left unchanged to allow the incoming government settle down. The increasing bargain hunting in the midst of price adjustments amid dividend payments are expected to enhance market recovery.
Technically, the low price attraction as a result of dividend adjustment should attract inflow of funds into the equity space in the short to medium term on the back of expected confidence boost from the incoming government and economic resilience in the face of increasing headwinds.
During the week, there were a lot of insider dealing notifications from many companies, suggesting that these members of top management and board are seeing inherent value in their companies hence their repositioning, which should guide investors and traders as they watch the market and take investment decisions. In this same period, Airtel Africa presented its mixed audited account for the full-year ended March 31, 2023, offering dividend of 3.27cents, while Caverton and Presco notified exchange of a delay in filling their Q1 2023 financials.
Portfolio rebalancing and positive market momentum continue to reflect on the sentiment and market breadth for the period, as the share prices of more companies were adjusted for dividend recommended. They include Accesscorp, Wema Bank and NPF Microfinance for N1.30, 30 kobo and 10 kobo respectively, coupled with selloffs and profit taking among highly priced stocks like BUA Cement and other blue chip companies that weighed on the market. The NGX’s Price-to-Earnings ratio remains relatively low and attractive for investments, following which we foresee a mixed trend in the rest of Q2 and beyond. Expecting the incoming government to boost confidence with right polices and appointment of economic managers.
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 pulling back to trade at $73.83 per barrel on negative sentiment in the oil market, in the midst 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 had a mixed trend for the week, recording three days of up market and two sessions of negative sentiment, which halted the previous two consecutive weeks of bull-run on a very high traded volume.
Consolidation for period continued despite the profit taking and reactions to Q1 numbers and high dividend yields, alongside buy opportunities presented by price adjustment for dividends. This supported market recovery in the midst NGX index sliding lower on a mixed sentiment, ahead of more March year and quarter-end accounts earnings release 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 for the period started on positive note, extending the gains recorded in the previous session as the benchmark NGX All-Share index gained 0.22%, followed by Tuesday’s 0.05% rise, before pulling back at midweek when it shed 0.75% on selloff in the shares of BUA Cement. This position was maintained on Thursday as the benchmark index dropped by 0.09% and rebounded on Friday with a gain of 0.10%. This brought the week’s total loss to 0.48%, which more than wiped out the previous week’s 0.12% gain.
Specifically, the benchmark NGX All-Share Index lost 250.69 basis points, closing at 52,214.62bps from the previous week’s 52,465.31 points level. Within the period the index touched an intra-week low of 52,077.15bps, from its highs of 52,684.07bps. Similarly, market capitalisation fell by N137bn, also representing a 0.48% depreciation in value at N28.43tr, from the previous week’s N28.57tr,
The week’s advancers table was dominated by low and medium cap stocks amid positive momentum and mixed sentiment among the blue chip companies and undervalued stocks as volatility alongside portfolio repositioning continued. Also notable was the accumulation of positions in some stocks after seeing the audited and Q1 results from different sectors, which had 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 52,684.45 and 52,886.74 levels again.
Market technicals revealed a positive breadth as gainers outnumbered losers in the ratio of 48:30 on a selling sentiment as indicated by investdata sentiment report showing 23% ‘buy’ volume and 77% sell position. Money Flow Index looking down to read 42.53bps, from the previous week’s 56.958points, an indication that funds left the market on a weekly chart to reflect profit booking in major stocks and major sectors of the market, in the face of high inflation rate and mixed outlook for fixed income market yields.
The NGX index’s action consolidated, trading above the 50 DMA and flat on the T line on a very high traded volume to range on a weekly time frame that supports an uptrend, which need to be confirm in the new week as pending financials are expected in the market. Just as the candlestick formation indicates that sellers are still in charge due to profit taking.
The selling and buying interests as the benchmark index traded above its 50 and 100-Day moving average, signal 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. This depends on market forces as platers digest financials that will give direction as trading opens on Monday with expectation of April inflation report today. 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.

Mixed Sectoral Indices
The sectorial performance indexes for the week were mixed, as NGX Industrial Goods and Banking 3.36% and 0.99% closed lower respectively, while NGX Energy led the advancers after gaining 5.20%, followed by Insurance and Consumer goods with 1.20% and 0.89% respectively.
Activities in volume and value were up, as investors exchanged 3.6bn shares worth N36.45bn, compared to the previous week’s 2.97bn units valued at N22.83bn. Volume was driven by Financial services, Conglomerates and Consumer goods, boosted by trading Fidelity Bank, Accesscorp, FBN Holdings, Dangote Sugar and Transcorp.
CWG and Ardova were the best-performing stocks for the week, gaining 56.82% and 37.50% respectively, closing at N2.07 and N26.40per share on market sentiment and forces. On the flip side, C & I Leasing and Accesscorp had 19.6%and 12% respectively, at N3.20 and N9.90 per share, purely on selloffs and price adjustment,

Outlook for the week
We expect mixed sentiments on profit taking and reactions to Q1 corporate earnings reports, as all eyes are on April inflation reports expected to guide investment decisions, in the midst of price adjustment and payment dates, ahead of the MPC meeting and incoming government agenda and policies. However, retracement to the 50,578.12 level and below is possible on profit taking as global and domestic events unfold.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605