Mixed Sentiments, Pullback Ahead, As NGXASI Attains Critical Levels, Investors Bet On New Govt

Market Update for the Week Ended June 2 and Outlook for June 5-9

The benchmark All-Share index of Nigeria’s stock market closed significantly higher last week on the strength of the reaction by investors to government’s policy statement as all eyes are looking on to the new government for a clear directions for the economy. Also, we note the reaction of organized labour to government’s knee-jerk removal of the subsidy on petrol, resulting in over 300% jump in the pump price of the product across the country, after the Nigerian National Petroleum Company Limited released its pricing template. Labour is irked by the government’s decision without first putting in place palliatives to cushion the effects of subsidy removal. Government’s decision, according to analysts, will further heighten inflationary pressure in the system, especially cost of transportation, which would affect food prices, as well as production cost, while reducing the purchasing power of the people, especially those in the private sector who will not enjoy any planned increase in minimum wage.
Meanwhile, market players and analysts continue to digest the recent Purchasing Managers’ Index (PMI) for the month of May showing a marginal expansion to 54 points from 53.8 points in April, according to Stanbic IBTC report. This reflected the positive impact of the improved liquidity as normalcy returns to the system, after the cash crunch that prevailed in Q1, indicating improved economic activities in the private sector. This followed by the rates hike and mixed outlook in fixed income market yields as rate across the three tenor in the last TB primary market auction decline to 2.47%, 4.99^ and 7.99% respectively for 91days, 182 days and 364 days.
At this point, the NGX appears to be at a critical level of breakout and fake-out after defying the ‘sell in May’ mantra among traders across the globe. The double top chart pattern of the market on a daily, weekly and month time frame calls for cautious trading at its recent resistance level of 55,822.82 basis points. This was after breaking various psychological lines of 53,000, 54,000 and 55,000points on above average traded volume and positive momentum as many stocks on the exchange its new 52 weeks high to crossover to the last trading month of Q2 ahead of another earnings reporting season. Also, the outlook for the month of June remains mixed in the midst of these, discerning investors and traders continued to reposition their portfolios as sectorial rotation persists to play defensive and protect their trades in a policy changing environment.
Technically, price correction or pullback is underway depending on market forces in the new week, even amid price adjustments by some companies for dividend recommended by their directors, which makes them attract funds into the equity space in the short to medium term on the back of the expected confidence boost from the new government and economic resilience in the face of increasing headwinds. Also noteworthy is the fact that Q2 earnings reporting season is around the corner and the improved economic activities as revealed by April and May PMI should support company’s performance and their scorecards. The board of Stanbic IBTC Holdings has already notified the exchange of its half-year closed period and board meeting date.
Also, during the week more companies notified the exchange of insiders’ dealings in their shares, especially Zenith Bank, McNichols, MTNN and others, a situation that suggests that these board members and top management are seeing inherent value in their companies hence their repositioning. This should guide investors and traders as they watch the market and take investment decisions.
The belated full year 2022 earnings report by FBN Holdings, Wapic Insurance and Unity Bank were presented to the market and with numbers below market expectation. That notwithstanding, FBNH is offering a dividend of 50 kobo, while its impressive numbers for the Q1 ended March 31, 2023 suggests that investors should look forward to a more promising year. Also, the share prices of ABC Transport, Julius Berger, Sunu Assurance, AIICO, McNichols, Jaiz Bank and CAP Plc were adjusted for dividend of 0.015 kobo, N2.50, three kobo, three kobo, one kobo, five kobo and N1.55 respectively as recommended by their directors. Portfolio rebalancing and positive sentiment continue to reflect on the market breadth for the period, as more companies appreciated value for the week.
Positive sentiment and reaction to the inaugural speech of President Bola Tinubu impacted the nation’s stocks across board, particularly giant cement makers- Dangote and BUA, as well as Nestle, Geregu Power, MTN Nigeria, BUA Foods and other that pushed the benchmark index higher. The NGX’s Price-to-Earnings ratio remains relatively low and attractive for investments, following which we foresee a mixed trend in the last month of Q2 and beyond on profit booking and buying interests.
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, as it rebounded to trade at $76.13 per barrel on US debt ceiling vote and ongoing OPEC meeting with high possibility of output cut in the midst of global macroeconomic reports mixed 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
It was a short but bullish trading week when the NGX All-Share index posted four consecutive sessions of up market, despite the seeming profit taking to extend the two weeks of bullish transition to range on a high traded volume and positive market breadth.
Trading for the week opened on a positive note, extending the gains recorded in the previous session as the benchmark index gained 5.23%, after Monday holiday for president inauguration. this positive trend was sustained at midweek with gain of 0.05% and rest of the week with 0.07% and 0.02% respectively for Thursday and Friday. This brought the week’s total gain to 5.37%, from the previous week’s 1.51% positive position.
In all this, the key benchmark NGXASI gained 2,846.62 basis points, closing at 55,920.50bps from the previous week’s 52,973.88 points level. Within the period the index touched an intra-week high of 55,832.68bps, from its lows of 52,973.88bps. Similarly, market capitalisation rose by N1.55 trillion, also representing a 5.37% appreciation in value at N30.40tr, from the previous week’s N28.85tr,
Top advancers for the week were low, medium and large cap stocks amid accumulation and positive sentiment in blue chip companies and undervalued stocks while volatility and portfolio repositioning continued. Also notable was the increased buying interest in some stocks based on their audited full-year and Q1 results from different sectors that 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, looking forward to a breakout of the current level or pullback to 54,000 and 53,642.86 levels again.
Market breadth for the week was positive as gainers outpaced losers in the ratio of 66:23 on a buying pressure as revealed by investdata sentiment report showing 100% ‘buy’ volume and 0% sell position. Money Flow Index looking up to read 45.33bps, from the previous week’s 41.53points, an indication that funds entered the market on a weekly chart to reflect position taking in highly priced stocks and some sectors of the market, in the face of mixed outlook for fixed income market yields and positive government policy without liquidity.
The NGX index’s action has recently formed a double top across various time frames to signal reversal underway or a breakout to trade above the 50 DMA and 100 DMA on a high traded volume to rally on a weekly time frame that supports an uptrend or pullback, which need to be confirm in the new week as pending financials are expected in the market. Just as the candlestick formation indicates that buyers are still in charge due to expectations.

Bullish Sectoral Indices
The sectorial performance indexes for the week were green, which NGX Energy led the advancers after gaining 10.46%, followed by Consumer, Industrial goods, Banking and Insurance with 8.52%, 5.81%, 4.89% and 1.21% respectively.
Transactions in volume and value terms were up, as market players exchanged 2.59bn shares worth N46.64bn, compared to the previous week’s 1.96bn units valued at N33.90bn. Volume was driven by Financial services, Conglomerates and Consumer Goods stocks, boosted by trading Accesscorp, UBA, FBNH, Zenith Bank and Transcorp.
Conoil and Eterna emerged best-performing stocks for the week, after gaining 45.78% and 32.14% respectively, closing at N69.90 and N9.25 per share on positive market sentiment for oil sector and improved earnings. On the flip side, Tantalisers and CHI Plc had lost 16% and 11.48% respectively, at N0.21 and N0.54 per share, purely on profit taking and selloffs,

Outlook for the week
We expect mixed sentiments and likely pullback at the current critical level of the NGX in the midst of expected policy guideline and implementation, as corporate actions provide price adjustment and payment dates. However, retracement to the 54,578.12 level and below is possible on profit taking as global and domestic events unfold.

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