Mixed Sentiments Still On Buying Interests In Value Stocks, As Investors Bet On Q1 GDP, MPC Outcome

Market Update for May 18

Thursday’s trading on the Nigerian Exchange short-lived its bullish trend as selloffs hit its most capitalized stock- Airtel Africa, just as others especially the blue chip companies which had rallied after price adjustments for dividend proposed by their directors. The market consolidation range continued as the composite NGX All-Share index pulled back on a negative market breadth and low traded volume to reflect the mixed sentiment of players ahead of next week’s meeting of the Central Bank of Nigeria’s Monetary Policy Committee and inauguration of new administration.
The NGX is now at the point of breakdown or reversal as liquidity level remains relatively high in the midst of the gradual return of confidence in the market as revealed by the relatively high volume and low price entry that had attracted new entrants on strong fundamentals of quoted companies and their future growth prospect. There is the high hope that the incoming government is pro-market and economy, ingredients needed to drive developments and enhance the living standard of Nigerians. These factors are likely to impact the market and drive positive sentiment on the back of policy statements and appointment of economic managers to support the renewed hope.
Despite the profit booking, mixed sentiments and accumulation in some value companies continue as core investors plough their dividends back into the market, a situation that had 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 below the 20-Day Simple Moving Average on the daily chart, a situation that calls for caution, but should guide technical traders and discerning investors, based on the dividend yields and low market Price to Earnings Ratio that provides better opportunity for investors to hedge against inflation even when fixed income market yields look attractive and remain mixed.
Also, there is the uncertainty of a rates crash as the incoming government moves to drive economic growth and development, even as we note the suspension of the planned removal of fuel subsidy and postponement of the population census, signaling the possibility of a policy shift. These may be a plus for the equity market on a likely financial market and economic reset. Market volatility remains at the extreme on positive sentiment as T-line turned support for index action ahead of the next market forces and positive statement.
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Oil price oscillation continued as it rebound to trade at $76.53 per barrel in the midst of expected US lifting the debt ceiling and slowing China economic recovery in the face of central banks rates hike that is driving economic contraction in the face Ukraine attack. 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 war that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Meanwhile, Thursday’s trading started on a gap down and it was sustained for the rest of the session, on profit taking across the major sectors of the market, a situation that pushed the NGXASI to an intraday low of 52,044.02 basis points from its highs of 52,139.51ps, before closing below its opening level at 52,109.43bps.
Market technicals were negative and mixed with lower volume traded when compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 68% buy position and 32% sell volume. The total transaction volume index stood at 0.52 points, just as momentum behind the day’s performance was strong, with Money Flow Index reads 71.62pts, from the previous day’s 81.08pts, indicating that funds left the market.
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Index and Market Caps
At the end of Thursday’s trading, benchmark NGX All-Share Index lost 471.43 basis points, closing at 52,109.43bps, from its 52,580.86bps opening level, representing a 0.90% decline, just as market capitalization fell by N256.70bn to N28.37tr, from the previous day’s N28.63tr, which also represented a 0.90% depreciation in value.
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The day’s downturn was driven by selloffs and profit taking in the shares of Airtel Africa, Ardova, Academy Press, Nahco, SterlingNG, PZ, Wapco, and Honeywell Flour among others, which impacted negatively on Year-To-Date gain which reduced to 1.67%. Market capitalization YTD gain slowed down to N126.18bn, representing 1.63% above its opening level for the year.

Bearish Sector Indices
Sectoral performance indexes were in red, as the NGX Oil/Gas led the decliners after losing 0.48%, followed by Banking, Insurance, Consumer and Industrial goods with 0.44%, 0.34%, 0.02% and 0.01% respectively.
Market breadth was negative as losers surpassed gainers in the ratio of 26:22, while activities in volume and value were down after players exchanged 334.24m shares worth N5.15bn, driven by trades in Accesscorp, GYCO, Zenith Bank, Transcorp and UBA.
ABC Transport and MRS Oil were the best performing stocks, gaining 10% and 9.97% respectively, closing at N0.40 and N37.10 per share, on market forces. On the flip side, Academy Press and Ardova lost 10% and 9.88% respectively, closing at N1.53 and N22.35per share, purely on profit taking.

Market Outlook
We expect mixed sentiments to continue on buying interests in value stocks and profit taking, as payments for dividend to support market liquidity, just as investors reposition their portfolio ahead of markdown dates, Q1 GDP, 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.

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