Mixed Trend Ahead Of Policy Reforms, Q2 Earnings, Amid Bargain Hunting, Profit Taking

Market Update for July 10
The nation’s equity market sustained its positive gains and bullish momentum on Monday, opening the week higher on a very high traded volume, in the midst of supportive economic reforms, the expected half-year earnings reporting season, and upcoming Monetary Policy Committee meeting, the first under the new administration. These are expected to give the financial market and economy direction with the possibility of continued rates hike, or a pause to assess the impact of the new government’s policies and economic reforms so far.
We note that monetary policy reform and financial sector reset are ongoing to drive the target 6% GDP growth target of the government and attract investment from domestic and foreign investors.
The increasing inflow of fund into the equity space and NGX uptrend has confirmed the bullish ride in the market, as the benchmark index’s action broke out another psychological line of 64,000 basis points mark, heading to surpass the NGX’s 2008 all-time high on a different buying pattern and scenario. That is, expectedly, supporting the markup phase, while the chart pattern supports a continuation of trend, or correction that also needs confirmation as the market opens this Tuesday morning.
Sector rotation and portfolio reshuffling continued ahead of the half-year earnings reporting season and this month’s MPC meeting, all of which are happening against the backdrop of an environment where reform policies are driving hyperinflationary pressure in the face of an already heated economy and headwinds ranging from rising inflation, high interest rate regime and insecurity, among others.
The NGX extended its uptrend on a positive sentiment and buying interest, in the midst of the seeming cash out of some stocks by traders. Investors should know that profit taking is part of market dynamics. This is why with the changing market structure as a result of gradual return of foreign portfolio investors and trading environment, we look forward to a mixed outing and intermittent profit taking, since factors that pushed the market to this level remain unchanged so far. We also note that the earnings reporting season will reveal the state of corporate earnings and others, which 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.
Major sectors of the market witnessed a positive performance as the bull-run continue on buying interests among low, medium and high cap stocks, especially oil, banking, industrial, telecomm and others that pushed the index up. 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.
The NGX index’s action continued to trade 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 profit taking and correction any time. 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 at $78.23 per barrel in the midst of the supply concerns and fear of global recession, 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.
Meanwhile, Monday’s trading started on the upside and was sustained for the rest of the session, despite oscillating on profit-taking and buying interest across sectors that pushed the Index to an intraday high of 64,674.08bps, from its lows of 63,050.41ps, before closing above it opening points at 64,603.69point.
Market technicals were positive and strong with a higher volume traded when compared to the previous session’s in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 96% buy position and 4% sell volume. The total transaction volume index stood at 1.99 points, just as energy behind the day’s performance was strong, with Money Flow Index reads 90.14pts, from the previous day’s 85.59pts, indicating that funds entered the market.
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Index and Market Caps
At the end Monday’s trading, the benchmark NGXASI gained 1,563.28bps closing at 64,603.69bps, from its 63,040.87bps opening level, representing a 2.48% growth. Market capitalization also rose by N851bn to N35.18tr, from the previous day’s N34.33tr, which also represented a 2.48% appreciation in value.
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Monday’s upturn was driven by positioning in shares of Dangote Cement, Conoll, MRS Oil, MTNN and Dangote Sugar among others. This impacted positively on Year-To-Date growth, reducing it to 26.05%, while Market Capitalization YTD gain increased to N7.12tr, representing 26.02% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed higher, save for NGX Consumer goods that closed lower by 0.18%, while NGX Industrial goods led the advancers after gaining 5.13%, followed by Insurance, Banking and Energy with 4.17%, 2.71% and 2.61% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 69:19, while activities in volume and value were up after investors exchanged 1.84billion shares worth N22.03bn, driven by trades in, FBNH, Universal Insurance, SterlingNG, Transcorp and Aiico.
Dangote Cement and MRS Oil were the best performing stocks, gaining 10% each, closing at N330.10 and N108.45 per share respectively, on positive market forces and sentiment. On the flip side, Phama-Deko and Union Dicon lost 9.82% and 9.50% respectively, closing at N1.83 and N8.10per share, purely on selloffs and profit taking.

Market Outlook
We expect the mixed trend and positive sentiments to continue on bargain hunting and profit taking, as players reshuffle their portfolio amidst supportive reforms of the government, just as more policy pronouncements and appointments 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
Tel: 08028164085, 08179547605