Mixed Sentiments, As Investors Bet On MPC Outcome, Q2 Earnings Inflow, Profit Booking

Market Update for the Week Ended July 21 and Outlook for July 24-28

The Nigerian Exchange (NGX) rebounded last week on renewed optimism and increased buying interest across different sectors and classes of stocks, especially in the financial sector. This was helped by the impressive performance of corporate earnings released during the period which triggered positive sentiments and momentum that reversed the previous week’s negative outing and profit taking on an above average traded volume.
Corporate half year earnings that hit the market last week are Multiverse Mining Plc, FBN Holding and Japaul Gold, which were impressive, attracting positive reactions that impacted their share prices. The numbers from FBN Holdings, parent company of 129 year-old First Bank of Nigeria Limited came after trading had closed, with impressive numbers that beat investors’ expectation. Specifically, hross earnings stood at N656.55bn, from N359.15bn in the same period of 2022, representing a growth of 83%, while net income for the period grew by 231% to N187.24bn, up from N56.6bn in 2022. This also produced earnings per share of N5.10 which gives investors an insight into what to expect from the banking sector which remains a net gainer from the government ongoing economic reforms, among others.
Despite the seeming economic concerns and the changing fundamentals in Nigeria today, market players continue to accumulate positions in stocks, as they realign their portfolios on the strength of earnings released so far and in expectation of more numbers from high profile companies on the exchange. Amid the uptrend and retracement witnessed during the week, many stocks head toward their 52-week highs again, ahead of this week’s meeting of the Central Bank of Nigeria Monetary Policy Committee holding on Monday and Tuesday. Already, we note that the apex bank has taken a lot of monetary policy decisions that align with fiscal authority in what may be the desire to attract more foreign exchange inflow and boost liquidity in the economy, thereby signaling high possibility of leaving rate unchanged to events fall in place.
The NGX markup phase at this point will add more strength to the recovery and create opportunities for new entrants that trade breakouts especially as the market is heading to 66,000 basis points mark in expectation of more half year corporate earnings from the banking, insurance, energy, telecoms, service providers and others. This is as foreign portfolio investors gradually return to the market on the back of exchange rate unification that makes the stocks on the Nigerian Exchange cheaper and more attractive, despite the current volatility in the FX market.
Also, in the light of a changing investment environment that definitely calls for new investing and trading strategies, there may be intermittent challenges particularly as the recent fuel subsidy removal and Naira devaluation come with fresh economic risks and some sectors in the short-term. Investors have to navigate the terrain cautiously while ensuring that they protect their portfolios and still make profits. Discerning investors and traders should continue to reposition their portfolios, buy into defensive stocks to protect their trades, as sectorial rotation persists in a policy changing environment and profit taking. Also noteworthy is the fact that the NGX’s Price-to-Earnings ratio remains relatively low and attractive for investments, following which we foresee a mixed trend in Q3 and beyond on profit booking and buying interests.
To navigate the Q3 market volatility and the rest of the year’s mixed outlook profitably using fundamental and technical analyses 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. 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.
Last week, oil price continued its oscillation, extending its four weeks’ gains, trading at $81.07 per barrel in the midst of expected fed policy meeting, supply cut and China’s stimulus to boost economic recovery. We note the rising geopolitical tensions and supply disruptions due to the Russia-Ukraine war that has lingered for over 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 market performance last week was bullish, after the NGX recorded four trading sessions of up market and a day of flat position on profit-taking in the midst of buying sentiment, an above average traded volume and positive market breadth.
Trading activities for the period opened on a positive note on Monday, halting the previous losses as the benchmark NGXASI gained 0.60%, a situation that was sustained on Tuesday when the index, once again moved northward by 1.31%, before closing 0.01% flat at the midweek due to profit taking in some stocks. This trend was reversed on Thursday and Friday when the market rallied by 0.27% and 1.68% respectively, bringing the week’s total gain to 3.89%, against the previous week’s 0.7% loss.
Specifically, the benchmark NGX All-Share index gained 2,433.66bps, closing at 63,003.39bps from the previous week’s 62,569.73 points level, touching an intra-week high of 63,015.76bps, from its lows of 62,439.22bps. Similarly, market capitalisation rose by N1.33tr, also representing a 3.89% appreciation in value at N35.40tr.
The top advancers’ table was dominated by low and medium cap stocks, amidst position taking and positive momentum, as volatility and portfolio reshuffling continued. Also notable was the buying pressure, while investors assessed impacts of the new government’s policies on the economy and industries. So far, market players are revealing the upside potentials and inherent value in some companies with strong earnings power and volume patterns ahead of more half year earning reports. So, buying into value, strong earnings and high dividend payout companies remain the way to go, despite the new prices impacting negatively on yields.
Market breadth for the week turned positive as gainers outpaced losers in the ratio of 73:19 on buying sentiments as revealed by investdata sentiment report showing 100% ‘buy’ volume and 0% sell position. Money Flow Index is looking up to read 85.21bps, from the previous week’s 79.85points, an indication that funds entered the market on a weekly chart, as the market rebounded on buying interest in blue chip stocks and others, just as position taking in highly priced stocks like Dangote Cement and Geregu support inflow into the market, in the face of increasing negative returns in fixed income market and economic reform of the new government.
NGX index’s action retraced up on a bullish trend to trade above the upper trend line of the bullish channel and 65,000 mark on buying sentiment in the midst of expectation of more earnings and bullish divergence on a daily chart, while trading above the 100 DMA and 200 DMA on above average traded volume to sustain the uptrend on a weekly time frame that supports reversal and continuation of trend, which need to be confirm in the new week as more fundamental in terms of earnings are expected in the market. Also, the candlestick formation indicates that buyers are in charge in the midst of expected MPC meeting outcome and economic managers list of the government.

Bullish Sectoral Indices
Sector performance indexes witnessed a bullish outing, as NGX Banking led the advancers with 15.81%, followed by Insurance, Industrial goods, Consumer and Energy with 5.65%, 2.80%, 1.67% and 0.64% respectively.
Transactions in volume and value were mixed as market players traded 4.18bn shares worth N99.05bn, compared to the previous week’s 5.25bn units valued at N63.421bn, driven by financial services, Oil/Gas and Conglomerates stocks. Specifically, volume was boosted by trading in the shares of UBA, FCMB, Japaul Gold, Accesscorp and Transcorp.
John Holt and Chellarams were the best-performing stocks last week, gaining 58.01% and 32.40% respectively, closing at N2.86 and N2.33per share on market sentiment and forces. On the flip side, the share prices of FTNCocoa and Courteville Business Solution lost 29.08% and 28.09% respectively, at N2.00 and N0.64 per share, purely on selloffs and profit taking,

Outlook for the week
We expect mixed sentiments on reactions to expected earnings and profit taking, in the midst the inflow of more earnings, the policy meeting outcome and ministerial list of the government. These are coming in the midst of expected policy guideline and implementation, corporate actions price adjustment and payment dates. However, retracement to the 62,578.12 level and below is possible on profit taking as global and domestic events unfold.

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