Mixed Sentiments May Linger On Profit Taking, Earnings, Economic Data Inflow
Market Update for May 3
The negative outing on the Nigerian Exchange continued at the midweek on mixed sentiment as the benchmark NGX All Share index closed lower on selloffs and profit taking in highly capitalized companies and blue chip stocks that dragged the market down in the midst of bargain hunting, increased liquidity as result of dividend payments reinvested into the market.
Meanwhile, market players continued to digest the recently released corporate earnings and macroeconomic reports, as the private sector and economic activities indicator rebounded powerfully in April, for the first time in the last three months. Specifically, Purchasing Mangers’ Index has rose above the 50 points benchmark to 53.8 points, surpassing the January figure of 53.5pts, a significant improvement over the 42.3 points reported in March, according to Stanbic IBTC’s latest Nigeria PMI report for April 2023.
We expect the mixed sentiment in the equity space to continue on the back of impressive Q1 numbers that the market has seen so far, as market players digest these earnings and position in fundamentally sound stocks at their current prices. The prevailing low prices of many stocks in the market due to adjustments that has made them ttractive for new entry and repositioning of portfolios in the midst of the current high inflation and contracting economic indicators as result of high cost of funds that impacting negatively on the general economy.
Already, the market had extended its recovery from its oversold state on a positive momentum, despite the profit taking in MTNN and others that slowed down the All-Share index, as it traded above the T line test the 20-Day simple moving average and EMA that support uptrend pattern for technical traders and discerning investors.
The prevailing dividend yields and low market price to earnings ratio provides better opportunities for discerning investors to hedge against inflation even when fixed income market yields look attractive. There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as fuel subsidy removal has been suspended to signal possibility of policy shift that may be a plus for equities on a likely financial market and economic reset. Market volatility remains at the extreme on positive sentiments, as the T-line turned support for index action ahead of the next market forces.
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Oil price oscillation continued, pulling back to trade at $72.95 per barrel in the midst of increasing fear of recession and falling crude inventories. Just as Fed had hike rate to 16 years high, even when their economies are contracting in the face Ukraine attack and 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. The up and down movement of oil price also continues to drive volatility across markets.
Midweek’s trading started on the downside and oscillated for the rest of the session on buying interest and profit taking in some high cap stocks, a situation that pushed the NGXASI to an intraday low of 52,172.84 basis points from its highs of 52,300.31ps, before closing below its opening figure at 52,207.77bps.
Market technicals were positive and mixed with higher volume traded, when compared to the previous session in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 27% buy position and 73% sell volume. The total transaction volume index stood at 1.29 points, just as energy behind the day’s performance was relatively strong as Money Flow Index reads 56.45pts, from the previous day’s 58.69pts, indicating that funds left the market.
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Index and Market Caps
At the end of Wednesday’s trading, the benchmark NGX All Share Index fell by 88.07 basis points, closing at 52,207.77bps from its 52,296.48bps opening level, representing a 0.17% drop, just as market capitalization shef N48.30bn to close at N28.43tr, from the previous day’s N28.48tr, which also represented a 0.17% depreciation in value.
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The downturn was driven by selloffs and profit booking in the shares of MTNN, Stanbic IBTC, NB, UBN, FCMB, NGXGROUP, Transcorp, Honeywell and Dangote Sugar among others, which impacted negatively on Year-To-Date gain,behich fell to 1.87%. Market capitalization YTD loss rose to N248bn, representing 1.83% above its opening level for the year.
Bullish Sector Indices
Sectoral performance indexes were up, save for the NGX Consumer goods that closed 0.49% lower, while NGX Energy led the advancers after gaining 0.78%, followed by Insurance, Banking and Industrial goods with 0.51%, 0.17% and 0.07% respectively.
Market breadth was positive, as gainers outpaced losers in the ratio of 22:17, while transactions in volume and value were mixed after players traded 670.08 million shares worth N5.03bn, with volume driven by trades in Transcorp, Accesscorp, Fidelity Bank, Chams and GTCO.
Ardova and Academy Press were the best performing stocks for the day after gaining 9.25% and 8.90% respectively, to close at N18.30 and N1.59 per share, on market sentiment and earnngs expectation. On the flip side, UBN and FCMB lost 8.87% and 7.79% respectively, closing at N7.10 and N3.93per share, purely on profit taking and selloffs.
We expect mixed sentiments to continue on profit taking, reaction to corporate earnings and digestion of PMI that recover to 53.8 points in April, ahead of markdown dates, CPI, 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.
CRO|Investdata Consulting Ltd
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