Mixed Sentiments Still On Profit Taking, Div Payments, Ahead Of Markdown Dates, April Inflation, MPC Outcome

Market Update for May 10
Profit taking activities resurfaced on the Nigerian Exchange at the midweek after four back to back sessions of positive outing and buying sentiments driven by bargain hunting on selected stocks and some sectors. The seeming low price attraction due to price adjustments for dividend recommended by directors and impressive Q1 numbers across the sectors that had supported the market ahead of major events like the expected of April Consumer Price Index, Monetary Policy Committee meeting and the May 29 inauguration day of a new administration that have positive deposition for the economy and market.
Selloffs in some highly priced stocks and profit booking in blue chip companies weighed down the benchmark NGX All-Share index to close lower on a low traded volume and positive market breath in the face of mixed session and sentiments. Midweek’s pullback has confirmed the earlier signal given by the candlestick formation on Tuesday, despite the correction, the buying interest in banking stocks reflected on the increasing traded volume in Accesscorpm UBA, and others.
The rebound of Accesscorp after the markdown and high volume traded in FBNH, FCMB, UBA, GTCO and others signaled the presence of smart money that are accumulating position in some stocks on the strength of high yields, impressive Q1 corporate earnings and expected audited accounts of March year-end companies. The current distribution phase of the market calls for caution, and at the same time looking at fundamentally sound stocks and the future growth prospects, considering the various sectors and current prices. The prevailing low prices of many stocks due to their recent adjustments for dividend that has made them attractive for new entry and repositioning of portfolios in the midst of high inflation and improving economic activities despite the high cost of funds.
The mixed sentiments on the exchange was strengthened as revealed by demands for more stocks, a situation that failed to support the composite index due to the selloffs in BUA Cement, Stanbic IBTC, Zenith Bank and others, which pulled down the index, even as it continues to trade above the 20-Day Simple Moving Average on the daily chart. This 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 rate crash by the incoming government as it moves to drive economic growth and development, even as we note the suspension of the planned remove 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 again to trade at $77.12 per barrel in the midst of cooling US inflation data, fear of recession and faltering economic recovery in China, just as central banks rates hike 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.
The up and down movement of oil price also continues to drive volatility across markets.
Midweek’s trading started slightly on the downside and oscillated throughout the session to pull back on profit taking in large cap stocks, amid position taking in banking, energy, consumer stocks, a situation that pushed the NGXASI to an intraday low of 52,077.15 basis points from its highs of 52,684.07ps, before closing below its opening level at 52,209.06bps.
Market technicals were positive and mixed with lower volume traded when compared to the previous session in the midst of breadth favouring the bulls on a selling sentiments as revealed by Investdata’s Sentiments Report showing 22% buy position and 78% sell volume. The total transaction volume index stood at 0.99 points, just as impetus behind the day’s performance was strong as Money Flow Index reads 75.14pts, from the previous day’s 77.56pts, indicating that funds left the market.
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Index and Market Caps
At the end of midweek’s trading the composite NGX All Share Index shed 396.35 basis points to close at 52,209.06bps from its 52,605.78bps opening level, representing a 0.75% decline, just as market capitalization fell by N216.28bn to N28.43tr, from the previous day’s N28.64tr, which also represented a 0.75% depreciation in value.
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Meanwhile, the downturn was driven by selloffs and profit booking in BUA Cement, Accesscorp, Zenith Bank, Caverton, Africa Prudential, Unity Bank and Academy Press among others, which impacted negatively on Year-To-Date gain as it reduced to 1.87%. Market capitalization YTD gain dropped to N155.17bn, representing 1.84% above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed with the NGX Consumer Goods and Energy closing 1.30% and 0.93% higher respectively, while the NGX Industrial goods led the decliners with a 3.40% loss, followed by Banking and Insurance with 1.22% and 0.22% respectively.
Market breadth was positive as gainers outpaced losers in the ratio of 33:20, while activities in volume and value were down after player’s exchange 554.31m shares worth N5.96bn, with volume driven by trades in Accesscorp, FBNH, FCMB, UBA and Zenith Bank.
Ardova and NCR were the best performing stocks, gaining 10% and 9.91% respectively, to close at N22.00 and N2.33 per share, on market forces. On the flip side, Caverton and Sunu Assurance lost 9.48% and 8.26% respectively, closing at N0.49 and N0.31per share, purely on selloffs and profit taking.

Market Outlook
We expect mixed sentiments to continue on profit taking and payments for dividend to support buying interest, just as investors react to corporate earnings ahead of markdown dates, April inflation report, 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