Mixed Sentiments Still, As Investors Digest 2023Q1 GDP Data, MPC Outcome, Amidst Improved Liquidity

Market Update for May 24

Nigeria’s stock market edged higher at the midweek as optimism among market players waxed stronger ahead of Monday’s swearing in of the new administration, in the midst of low entry prices and reinvestment of dividends by core investors, a situation that has enhanced liquidity in the equity space. This has influenced prices on the exchange in addition to the better-than-expected Q1 numbers, as positive sentiment and momentum in the market ignored the rising inflation and other macroeconomic reports.
The NGX broke out its recent strong resistance level of 52,658.89 basis points to 52,927.60bps after two weeks of consolidation and ranging market on an above average traded volume and positive market breadth. This has extended the market’s upbeat situation for the fourth successive session on buying sentiment across the major sectors of the market.
The Q1 GDP report released on Wednesday by the National Bureau of Statistics (NBS) revealed a slowdown in Nigeria’s economy at 2.31%, compared to the 2022Q4 position of 3.52%, representing a 1.21% decrease. This pullback in economic activities and growth in the first three months of 2023 was attributed to the cash crunch witnessed during the period, as well as the raging war in Ukraine. In real term, the non-oil sector contributed 93.79%, growing by 2.77% in Q1 2023, while the real growth of the oil sector was 4.21% negative year-on-year in Q1 2023. Also, at the end of the two-day Monetary Policy Committee meeting on Wednesday, members voted for yet another 50bp rate hike that brings the Monetary Policy Rate to 18.5% from 11.5% a year ago after seven consecutive meeting by the apex bank, while other policy variable were left unchanged. At the weekly Treasury Bills primary market auction, rates witnessed a decline across all three tenor to 2.29%, 4.99% and 7.99% for 91, 182, and 364-day respectively.
The buying interest and positive sentiments in some value companies continued as core investors ploughed their dividend incomes back into the market, a situation that has supported the flow of funds into the equity space as revealed by money flow index and candlestick formation at the end of the day’s trading. Also, the market awaits the audited financials of March year-end companies.
The market currently trades above the 20-Day Simple Moving Average and 50 DMA with golden cross on the daily chart, while heading to 53,000 level. As market digest the outcome of the CBN’s policy meeting and Q1 GDP figure. This situation calls for caution, but should guide technical traders and discerning investors, based on the dividend yields and low market Price to Earnings Ratio that provide 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, rebounding to trade at $78.22 per barrel in the midst of surprise inventory draw, OPEC’s possible output cut in June meeting and fear of US debt ceiling default. As China economic recovery remain weak in the face of central banks rates hike that is driving economic contraction in the midst Ukraine and Russia war. 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.
Midweek’s trading stated in the green and was sustained for the rest of the session, on increased buying in blue chip stocks, highly capitalized companies and others, a situation that pushed the NGX All-Share Index to an intraday high of 52,942.62bps, from its lows of 52,591.88ps, before closing above it opening figure at 52,927.60
Market technicals were positive and strong with higher volume traded when compared to the previous session in the midst of breadth favoring the bulls on a strong buying sentiment as revealed by Investdata’s Sentiments Report showing 96% buy position and 4% sell volume. The total transaction volume index stood at 0.70 points, just as momentum behind the day’s performance was strong, with Money Flow Index reads 82.99pts, from the previous day’s 83.63pts, indicating that funds left the market, despite closing higher.
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Index and Market Caps
The NGX All-Share Index, at the end of the day gained 306.41bps, closing at 52,927.60bps, from its 52,621.19bps opening level, representing a 0.58% growth, just as market capitalization rose by N166.84bn to N28.82tr, from the previous day’s N28.65tr, which also represented a 0.58% value gain.
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Meanwhile, Wednesday’s upturn was driven by buying interest and accumulation in the shares of Nestle, Total, Mansard, UACN, Geregu, Accesscorp, UPL, Academy Press, Nahco, Transcorp and Wapco among others, which impacted positively on Year-To-Date gain which reduced to 3.27%. Market capitalization YTD gain slowed down to N615.24bn, representing 3.24% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed higher, except for the NGX Insurance that closed lower by 0.10%, while the NGX Oil/Gas led the advancers after gaining 2.54%, followed by Consumer, Banking and Industrial goods with 2.07%, 1.06% and 0.23% respectively.
Market breadth was positive as gainers surpassed losers in the ratio of 36:15, while activities in volume and value were up after players exchanged 455.18m shares worth N7.83bn, driven by trades in Accesscorp, UBA, Zenith Bank, Fidelity Bank and GTCO.
Nestle Nigeria and Tripple Gee were the best performing stocks, gaining 9.98% and 9.88% respectively, closing at N1148.00 and N3.56 per share, on market forces and sentiment. On the flip side, Wapic and Academy Press lost 8.70% and 7.14% respectively, closing at N0.46 and N1.68per share, purely on profit taking.

Market Outlook
We expect mixed sentiments to continue as investors digest Q1 GDP, MPC meeting outcome and others in the midst of profit taking and dividend reinvestment to support market liquidity, just as investors reposition their portfolio ahead of markdown dates and March year end audited accounts.
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.

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