Mixed Trading, As Bargain Hunting Ahead, Amid Quarter-end Realignments, Interim Div
Market Update for June 28
Profit-taking activities resurfaced on the Nigerian Exchange on Tuesday ahead of the quarter-end portfolio rebalancing which forced the benchmark NGX All-Share Index to close marginally lower, thereby halting a five-day bull run. The decline followed drops in prices of banking, other financials, telecoms stocks, and blue-chips, on a very high traded volume and negative market breadth, due to profit-taking by bargain hunters across major sectorial indexes except for consumer goods.
This is amid concerns over the impending global economic recession, just as selling sentiments resurfaced across some sectors. Funds are flowing into fixed income instruments from risk-averse investors, due to the increase in the interest rate that followed the May inflation rate of 17.71%, even as fuel queues are still spreading across the Federal Capital Territory and Lagos, thereby threatening a further leap in the inflation rate. However, the equity market looks forward to the half-year corporate earnings of listed companies.
To avoid the old mistakes and costly losses of the past in this changing market momentum, we invite you to attend the Investdata Q3 Master Class, ahead of the half-year earnings reporting season and general elections. We note that the major political parties just concluded their primaries to select presidential candidates ahead of the February 2023 general election. Current developments in the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, while actively buying more, as seen in the recent market corrections. Despite the selling sentiment witnessed at the close of trading, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
In the ongoing window dressing by fund managers, the price actions simply mean that the market tells you what to do, and not the other way around, because the price is always right and does not care whatever a trader feels. Bull markets can go on for days, weeks, months, and years, but bear markets happen unexpectedly and can quickly destroy a trader’s profits, or even trading account if a stop loss is not in use.
Oil prices pulled back slightly after rebounding in recent time in the international market to trade at $117.10 per barrel, after American Petroleum Institute reported a large crude draw, even amidst fear that oil markets could face a doomsday scenario this week or beyond, if OPEC has enough capacity to avoid supply problem as long as the ongoing Russia-Ukraine war persists. Also, G7 plans to cap price Russian oil, as these chronic high energy prices are killing the global economy, heightening inflationary pressures across the globe on a weak economic outlook, thereby influencing monetary policies of central banks as they move to checkmate the impacts of the Russia-Ukraine conflict on the global economy to avoid economic recession. The nation’s soaring inflation is a potent threat to the fixed income market and investment yields, which should be an indication that there will be a reversal of funds flowing back to equity space in no distance time as institutional investors balance their portfolios.
Technically, the NGX index action has not confirmed change in the market phase, trading above the ‘T-Line’ and 50-day moving average, as the market remains strong, despite the negative outing on Tuesday. The strong support level has been within the 51,703 basis points region, while volatility persists and corrects towards the next breakdown is sported around 51,618.29bps. Should the index break this point, the next visible support is 51,580.35bps.
The possibility of the trend being sustained is high, and a function of market forces and improved economic conditions during this month and beyond, following which we advise investors to play defensive stocks and reduce investment risks around the market.
Meanwhile, Tuesday’s trading opened slightly on the downside and was sustained for the rest of the session, despite oscillating on profit-taking and selloffs in telecoms stocks, a situation that pushed the NGX’s index to an intraday low of 51,779.76bps from its highs of 51,975.06ps before closing below its opening points at 51,803.98bps.
Market technicals were negative and mixed, as volume traded was higher than the previous day in the midst of negative breadth and selling sentiments as revealed by Investdata’s Sentiments Report showing 88% sell position and 12% buy volume. The total transaction volume index stood at 1,00 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking down at 33.51pts, from the previous day’s 41.58pts, indicating that funds left the market.
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Index and Market Caps
The NGXASI, at the end of the day’s trading, shed 158.87bps, closing at 51,803.98bps, after opening at 51,938.88bps, representing a 0.31% decline. Similarly, market capitalization fell by N85.64bn, closing at N27.93tr, from the previous day’s N28.01tr, which also represented a 0.31% depreciation in value.
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Tuesday’s downturn was driven by profit-taking in MTNN, NGXGROUP, GTCO, Accesscorp, Ucap, Lafarge Africa, Oando, PZ and Livestock Feeds among others. This impacted negatively on Year-To-Date gain, dragging it to 21.27%, while market capitalization growth stood at N5.41tr YTD, representing a 24.72% rise over the opening level for the year.
Bearish Sector Indices
Performance indexes across sectors were down, except the NGX Consumer Goods that closed 0.29% higher, while the NGX Oil/Gas led the decliners after losing 0.47%, followed by Insurance, Industrial goods and Banking with 0.06%, 0.03% and 0.02% respectively.
Market breadth was significantly negative, as losers outnumbered gainers in the ratio of 19:10; just as activities in volume and value terms were up, after players exchanged 314.61m shares worth N12.85bn, with volume driven by trades in MTNN, FBNH, UBA, Zenith Bank and GTCO.
Sovereign Trust Insurance and Chams were the best-performing stocks after gaining 8.00% and 4.17%, while closing at N0.27 and N0.25 per share respectively on market forces. On the flip side, University Press and NGXGROUP lost 9.72% and 6.71% respectively, closing at N2.60 and N22.95 per share, on profit taking.
We expect mixed trading as bargain hunting continue, ahead of quarter end window dressing and interim dividend season in second half, while some March year-end audited accounts companies hit the market any moment before June 30, 2022. We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists and players digest the macro-economic data and Q4 unaudited earnings released so far. Analysts are also on the lookout for the inflation rate of 17.71% to support recovery in the new month amid oil prices oscillation. Also, the market continues to interpret the rising inflation in relation to the crude oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend-paying stocks in the hope of dividend announcements.
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Theme: Profiting From Asset Pricing In An Uncertain Market, Rising Rates Environment
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