Mixed Sentiments, As Investors Reassess Upside Potentials, Realign Portfolios, Ahead May Inflation Data

Market Update for June 13

The bull again resurfaced powerfully on the Nigerian Exchange to start the week’s trading on a positive note on the back of strong gains and buying sentiments, following the successful inauguration of 10th National Assembly, with the inaugural speeches of the Senate President and Speaker of the House of Representatives collaborating that of President Bola Tinubu on the need to position and drive economic growth and expansion. The market also reacted positively to last Friday’s late night shake up at the Central Bank of Nigeria (CBN) leading to the suspension of Godwin Emefiele, a move many believe could lead to improvements in the country’s financial sector regulation, and end the aggressive capital controls.
As I have always stressed in my various presentations and analyses, the economic and financial market, as well as sociopolitical reset is underway, and it is here already going by the new government’s policy statement, even as the market awaits further guidelines, strategies and agenda to achieve all that were promised.
Tuesday’s market performance halted three consecutive sessions of losses and profit taking to breakout various psychological lines of 56,000, 57,000 and 58,000 points, with the benchmark NGX All Share index closing significantly higher to a 16-year market high on a very high traded volume and strong positive market breadth. In the process, many stocks hit new 52-week highs on strong buying sentiments and an expected fall in interest rates as the government looks to reform monetary policy and unify the foreign exchange rates.
All classes of equities on the exchange witnessed a rally on the inflow of funds as investors and traders took position in low, medium and high cap stocks, even as many company’s dividend yield becomes lower as seen in their Q3 earnings forecast and anticipated Consumer Price Index for May. These should guide investors on how to reposition their portfolios ahead of the Q2 earnings reporting season, as quoted companies started notifying the exchange and investors of their closed periods and board meeting dates to approve half-year financials. Also, all eyes are on audited financials of March year-end companies.
The market is currently trading above its 50-Day Simple Moving Average and 100DMA after sideways trending on the daily to breakout the double top formation on weekly and monthly chart, while heading to 58,484 basis points level, as stocks are making new highs. This calls for caution, amid the possibility of profit taking any time soon. As such, let technical traders and discerning investors be guided, because higher prices will lead to lower dividend yields, even when market Price to Earnings Ratio is relatively low. It however provides 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 Tuesday, rebounding again to trade at $74.34per barrel in the midst of US consumer price index slowing down and possibility of Fed leaving rate unchanged in the ongoing meeting today June 14. With recent rate cut by China to support its economic recovery that had remain weak, even as the Russia-Ukraine war continues. 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, Monday’s trading opened sharply in the upside and it was sustained throughout the session, on increased positioning across all sectors, a situation that pushed the NGX All-Share Index to an intraday high of 58,195.59bps, from its lows of 55,930.97ps, before closing significantly above it opening figure at 58,163.55 point
Market technicals were positive and strong with a higher 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 99% buy position and 1% sell volume. The total transaction volume index stood at 2.08 points, just as impetus behind the day’s performance was strong, with Money Flow Index reads 81.12pts, from the previous day’s 78.47pts, indicating that funds entered the market.
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Index and Market Caps
At the end of the day’s trading session, the benchmark NGX All-Share Index gained 2,232.58bps, closing at 58,163,59bps, from its 55,956.59bps opening level, representing a 3.99% growth. Market capitalization rose by N1.221tr to N31.67tr, from the previous day’s N30.45tr, which also represented a 3.99% appreciation in value.
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Monday’s upturn was driven by high demand for stocks like Airtel, MTNN, Dangote Cement, BUA Foods, Zenith Bank, GTCO, UBA, Accesscorp, MRS Oil, FCMB, NB, ETI and SterlingNG among others. This impacted positively on Year-To-Date gain, which increased to 13.49%, while Market Capitalization YTD gain went up to N3.65tr, representing 13.45% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed in green, led by NGX Banking which gained 8.8%, followed by Insurance, Consumer, Industrial goods and Energy with 4.8%, 3,4%, 1.2% and 0.2% respectively.
Market breadth was strongly positive as gainers outpaced losers in the ratio of 61:13, while activities in volume and value were up after players exchanged 1.19bn shares worth N19.23bn, driven by trades in, UBA, GTCO, Zenith Bank, Japual Gold and Accesscorp.
Zenith Bank and GTCO were the best performing stocks, gaining 10% each, closing at N30.80 per share each on positive market forces and sentiment. On the flip side, Ellah Lakes and John Holt lost 10% each, closing at N3.60 and N1.26per share, purely on profit taking.

Market Outlook
We expect mixed sentiments as market players reassess the upside potentials of the stocks and NGX in the midst of portfolio realignment and expectation of May inflation report, just as more policy pronouncements and appointments to give direction. Also, Q2 earnings reporting season draw closer to confirm the real state of the company performance and attract 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. 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