Mixed Trading Sentiments, Amid Cautious Trading Ahead Of March Inflation Data, Q1 Earnings

Market Update for April 13
The corrective mood on the nation’s stock market continued Thursday as seesaw movements resurfaced again, reflecting mixed sentiments and relatively low liquidity in the equity space due to high yields in the fixed income market in the midst of high interest rate in the financial market and rising inflation in the country.
The nation’s economic activities continue to contract as revealed by the latest March Purchasing Manager Index report released by Stanbic IBTC showing a further decline to 42.3 basis points, from 44.7 points in February indicating that private sectors businesses had suffered setback for the period, due to the cash crunch, high cost of funds and foreign exchange market hiccups in the face of high rates and inflation.
The benchmark NGX All-Share index closed slightly on a negative note, thereby halting the previous session gain on above average traded volume and negative market breadth amidst buying and selling interest in expectation of pending 2022 audited financials and Q1 2023 earnings reports.
On Thursday, GSK and Industrial Gas released their 2022 audited reports with above-average performance proposing 55kobo and 40 kobo dividends respectively, while United Bank for Africa made available its unaudited Q1 2023 results showing an impressive start of the new financial year, thereby extending the outstanding performance of 2022, despite the impact of the Central Bank of Nigeria (CBN) induced cash crunch and economic headwinds.
Despite these, the NGX has confirmed its decline phase with the All-Share index trading below the 50-Day simple moving average and EMA to signal a bottom reversal pattern for traders and discerning investors. This, however, requires confirmation before investors can jump into any position, especially as stocks recently markdown have rebounded on the back of their prevailing undervalued state. Q1 numbers are likely to come predominantly mixed, due to the low economic activities during the period as a result of to cash crunch.
The prevailing dividend yields and low market price to earnings ratio provides better opportunities for discerning investors to hedge against inflation even when fixed income market yields look attractive. There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as a policy shift may be a plus for equities on a likely financial market and economic reset. Market volatility remains at the extreme on mixed sentiment as T-line stay above the index action ahead of the next market forces, due to the increasing number of companies announcing their board meeting dates to approve Q1 2023 numbers.
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Oil price oscillation continued, as crude trades at $86.23 per barrel in the midst of fear of mild recession in US and policy direction of Fed. Just as attack on Ukraine is rising and geopolitical tension here and there 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.
Thursday’s trading opened slightly on the downside which was sustained throughout the session, despite oscillating on selloffs and position taking in blue chip stocks, a situation that pushed the NGXASI to intraday low of 51,941.27 basis points from its highs of 51,981.35ps, before closing marginally below its opening figure at 51,944.58bps.
Market technicals were negative and mixed with higher volume traded, when compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 8% buy position and 92% sell volume. The total transaction volume index stood at 0.95 points, just as momentum behind the day’s performance was weak going by Money Flow Index at 32.78pts, from the previous day’s 30.87pts, indicating that funds entered the market, despite closing flattish.
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Index and Market Caps
At the end of the day, the composite NGX All Share Index, lost a marginal 8.83 basis points, closing at 51,944.581bps from the 51,953.41bps it opened, representing a 0.02% drop, just as market capitalization fell by N4.81 billion to close at N28.30tr, from the previous day’s N28.30tr, which also represented a 0.02% value loss.
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Meanwhile, Thursday’s downturn was driven by selloffs and profit taking in the shares of May & Baker, Fidelity Bank, Africa Prudential, SterlingNG, NPF Microfinance, Lasaco, Multiverse and Academy Press among others, which impacted mildly on Year-To-Date gain which slide to 1.35%. Market capitalization YTD gain stood at N246 billion, representing 1.36% above its opening level for the year.

Mixed Sector Indices
Sectorial performance indexes were mixed, as NGX Banking and Insurance closed 1.08% and 0.29% lower respectively, while NGX Industrial goods led the advancers after gaining 0.16%, followed by Consumer goods with 0.05%. Just as NGX Energy was flat.
Market breadth turned negative as losers outpaced gainers in the ratio of 21:18, while transactions in volume and value were up after investors exchanged 302.92m shares worth N2.02bn, with volume driven by trades in Transcorp, Fidelity Bank, UBA, Zenith Bank and FCMB.
Transcorp and Coronation Insurance were the best performing stocks for the day after gaining 10% and 7.69% respectively, closing at N1.54 and N0.42per share respectively, on market sentiment and forces. On the flip side, May/Baker and Ikeja Hotel lost 10% and 9.24% respectively, closing at N4.05 and N1.08per share, purely on profit taking.

Market Outlook
We expect mixed trading sentiments to continue as players are being cautious, ahead of the March inflation data and more Q1 earnings expectation in the midst of price adjustment for dividend and pending 2022 audited numbers. We note that income investors continue to target dividend paying 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 correction. Also looking at the trends and events across the globe and domestically.

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