Market Update for July 12

Profit booking resurfaced powerfully on the Nigerian Exchange at the midweek as selloffs hit all kind of equities across low, medium and highly priced stocks across sectors of the market, thereby halting the fifth successive session of bull transition as the benchmark NGX All Share index struggled to the 2008 all-time high after testing the 66,000 basis point mark on a less than average traded volume and negative market breadth. The bull-run is driven by new government’s market supportive policies and economic reforms, along with other factors like the expected Q2 numbers, formation of an economic management team for the government, and the gradual return of foreign portfolio investors to the nation equity market, while not forgetting the declining TB rates at the end of midweek.
The NGX’s pullback at midweek revealed price correction and profit taking activities which is temporal and expected after the rally so far, as factors mentioned above will determine the next direction of the market, especially as all eyes are the June inflation report from the National Bureau of Statistics (NBS), and the coming Monetary Policy Committee meeting outcome. The market is nonetheless still trading above the 64,000bps psychological line after pulling below the 65,000bps on selloffs and profit taking. Market pullback is not the time for market players to panic, rather it is an opportunity to reenter positions with strong fundamentals and positive technicals.
Despite the profit taking or pullback Investors should know that profit taking is part of market dynamics, which is why with the changing market structure due to the gradual return of foreign portfolio investors and changes in the trading environment, we look forward to a mixed outing and intermittent profit taking. It is noteworthy that factors responsible for pushing the market to this level remain unchanged so far, even as we expect that the earnings reporting season will reveal the state of corporate earnings and others. This would expectedly be the game changer as we go into the quarter. Already, all eyes are on the expected appointment of economic managers and minsters by this new government, a situation that will determine their rating of the new administration.
Across sectors of the market were negative performance as profit taking hit all indexes to pulled down the NGXASI index. This was as more quoted companies notified the exchange and investors of insider dealings, their closed periods and board meeting dates to approve the half-year financials, while Flourmill and Honeywell informed the exchange of delay in releasing their audited account for March year end.
Despite the bearish engulfing chart pattern of NGX index’s action, the market still trades above its T-line, 100-Day Simple Moving Average and 200DMA on the daily and weekly chart in the midst of government economic and financial market reforms. This calls for a change in trading strategies and caution, amid the possibility of reversal or continuation of trend. As such, technical traders and discerning investors must be guided, because higher prices will lead to lower dividend yields, even when market Price to Earnings Ratio is relatively low. It however provides 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.
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Oil price oscillation continued as it extended gains to trade above $80, at $80.34 per barrel to sustain two weeks gains in the midst of US inflation lower to 3% in 2 years and weak dollar, as rate hike persists across many economies. Even as the Russia-Ukraine war remain a concern, the prevailing high interest rate regime and slowing inflation. 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 started slightly on the upside in the early hours of trades before pulling back for the rest of the session on profit-taking in blue chip stocks and large cap companies that pushed the Index to an intraday low of 63,880.87bps, from its highs of 65,669.29ps, before closing below it opening points at 64,046.93bps.
Market technicals were negative and mixed with a higher volume traded when compared to the previous session in the midst of breadth favouring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 9% buy position and 91% sell volume. The total transaction volume index stood at 1.21 points, just as impetus behind the day’s performance was strong, with Money Flow Index reads 83.74pts, from the previous day’s 90.17pts, indicating that funds left the market.
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Index and Market Caps
At the close of trading, the composite NGX All-Share index shed 1,622.36bps, closing at 64,046.93bps, from its 65,669.29bps opening level, representing a 2.47% decline. Market capitalization also fell by N883.41bn to N34.87tr, from the previous day’s N35.75tr, which also represented a 2.47% depreciation in value.
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Meanwhile, Wednesday’s downturn was driven by selloffs and profit taking in shares of Dangote Cement, Nestle, FCMB, Accesscorp, Wapco, Eterna, and Dangote Sugar among others. This impacted positively on Year-To-Date growth, reducing it to 24.97%, while Market Capitalization YTD gain increased to N6.88tr, representing 24.93% above its opening level for the year.

Bearish Sector Indices
Sectoral performance indexes closed in red with the NGX Insurance leading the decliners after losing 5.42%, followed by Industrial, Banking, Consumer goods and Energy with 5.39%, 2.61%, 0.77% and 0.45% respectively.
Market breadth turned negative as losers outnumbered gainers in the ratio of 63:13, while activities in volume and value were up after players exchanged 1.16 billion shares worth N12.69bn, driven by trades in, UBA, Japaul Gold, Transcorp, FCMB and Accesscorp.
Courtville Business Solution and Deap Capital were the best performing stocks, gaining 10% each, while closing at N0.88 and N0.33 per share respectively on positive market forces and sentiment. On the flip side, Tantaliser and ABC Transport lost 10% each, closing at N0.27 and N0.45per share, purely on selloffs and profit taking.

Market Outlook
We expect mixed sentiments and position taking in the midst pullback and portfolio realignment to support rebound, as supportive reforms of the government, more policy pronouncements and appointments of minsters would offer investment direction. Also, Q2 earnings reporting season draws closer to confirm the real state of the company performance and attract liquidity in the midst of markdown dates and the release of remaining audited accounts.
We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios. 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
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08179547605