Mixed Trend, Amidst Portfolio Realignments, Bargain Hunting, As Investors Await Zenith, GTCO, Others

Market Update for August 30

Profit taking resurfaced on the Nigerian Exchange on Thursday after three straight sessions of bull run that led to NGX recording a new all-time high in the midst of weak broader market gains and momentum, even as macroeconomic headwinds continued to weigh on businesses and purchasing power of Nigerians, casting doubt on the government’s ongoing economic reforms. There was, however, the seeming investor confidence in the market with the services sector performance, among others supporting the market rally, despite the slowdown in economic growth as revealed by the Q2 GDP released recently by the National Bureau of Statistics.
The pullback witnessed on the exchange was due to traders booking profit from the conglomerates, consumer goods, banking sectors, especially from Transcorp which had rallied for eight straight trading sessions on the news of acquisition of 60% of Abuja Electricity Distribution Company, as part of its continued expansion in capacity. Also, profit taking hit Dangote Sugar and Nascon before Dangote Sugar made available the scheme of merger with Nascon and Dangote Rice, in the face of changing market conditions and trading environment due to macroeconomic headwinds, mixed corporate earnings and the prevailing yield in alternative market with rates and yields outlook remaining mixed due to rising inflation, high interest rate and exchange rate problem as a result of the high volatility in the exchange.
The NGX All-Share index fell marginally on a very high traded volume and positive market breadth, just as there were mixed sentiments in the broader market. The candlestick formation at the end of trading signaled a top reversal pattern after the index had broken the strongest resistance of 66,371 level of 2008 to reveal a distribution phase that need to be confirmed as the market opens on Thursday, being the last trading session of the month. Also, the market continue to interpret and digest the latest numbers from Flour Mills, Honeywell, Stanbic IBTC, Cutix and others.
This is the time to buy into value stocks with strong fundamentals, as the market looks forward to a favourable news that will support this buying interest that resurfaced. Also noteworthy is the mixed outlook in the fixed income market yields and rates, amidst portfolio repositioning and sector rotation on the strength of company earnings’ power.
The NGX index’s action is currently trading above the 66,000 basis points, ‘T line’ and 50-day moving average, attracting bargain hunters to position in fundamentally sound medium and low cap stocks amidst digesting of scorecards of many companies and prevailing macroeconomic factors including exchange rates, yield in money market and Q2 GDP. It is therefore time to use technical tools, if you have been ignoring charts and fighting the trends, it is your chance to step up your game. It is pertinent to stress the fact that profit taking is part of market dynamics, which can occur at any time, as we look forward to a mixed outing and intermittent profit taking, since policy factors that pushed the market up are shaking, as market wait for favorable news and statements from the minsters.
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Oil price oscillation continued, as it stays flat to trade at $85.85 per barrel in the midst of weak global demand and China manufacturing PMA inching higher. The Russia-Ukraine war remains a major 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 opened slightly on the downside and was sustained, despite oscillating throughout the session on profit taking and buying interests in blue chip stocks and others. This situation pushed the Index to an intraday low of 66,359.67bps from its highs of 66,649.93bps, before closing marginally below the opening points at 66,439.53bps.
Market technicals were positive and strong with a higher volume traded when compared to the previous session in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 28% buy position and 78% sell volume. The total transaction volume index stood at 1.35 points, just as the momentum behind the day’s performance was strong, with Money Flow Index reading 72.15pts, from the previous day’s 70.57pts, indicating that funds entered the market.
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Index and Market Caps
At the close of Wednesday’s trading, the key NGXASI lost 50.81bps, closing at 66,439.53bps, from its 66,490.34bps opening level, representing a 0.08% drop. Market capitalization also fell by N27.86bn to N36.36tr, from the previous day’s N36.39tr, which also represented a 0.08% value loss.
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Meanwhile, the session downturn was driven by profit booking in the shares of Transcorp, GTCO, Zenith Bank, Accesscorp, Flour Mills, Stanbic IBTC., GTCO and Oando, among others. This impacted mildly on Year-To-Date growth, which slipped to 29.64%, while Market Capitalization YTD gain stood at N6.92tr, representing a 30.26% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Banking and Energy closed lower by 0.64% and 0.02% respectively, while the NGX Insurance led the advancers after gaining 1.46%, followed by Consumer goods and Industrial goods with 0.32% and 0.11% respectively.
Market breadth was positive as gainers outpaced losers in the ratio of 27:24, while transactions in volume and value were up after stockbrokers executed 637.19m shares worth N7.79bn, driven by trades in Transcorp, Accesscorp, Dangote Sugar, Jaiz Bank and Fidelity Bank.
Consolidated Hallmark Insurance and Capital Hotel were the best performing stocks, gaining 10% each, closing at N1.10 and N2.75 per share each, on market forces. On the flip side, Transcorp and CWG lost 9.99% and 0.88% respectively, closing at N6.31 and N3.65 per share, purely on the back of profit taking.

Market Outlook
We expect mixed sentiment to continue on portfolio realignments in the midst of bargain hunting and mixed outlook for money market yields ahead of first tier banks earnings reports expectation and sector rotation persists.
However, pullbacks are creating buying opportunities amidst the economic reforms of the government, just as more policy pronouncements and economic managers hit the ground running, a situation expected to offer investment direction eventually.
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, while also looking at the trends and events across the globe and domestically.

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