Market Update for June 6
Monday’s trading activities on the Nigerian Exchange extended its bull run, as the NGX All-Share Index inched up further, thereby recording its second consecutive positive outing session on a very high traded volume and affirmative market breadth.
This ongoing rebound was attributed to renewed buying interests among blue-chip stocks that had suffered losses before now in reaction to the rate hike by the Central Bank of Nigeria (CBN), and concerns about the impending global economic recession.
The uptrend witnessed after the pullbacks started last Friday followed the demand for financial and highly-priced stocks in the face of price adjustment of ETI, Skyway Aviation, and Trans-Nationwide Express for their 2021 full-year dividend as recommended by their boards. Also, buying sentiment continues across some major sectors, just as funds continue to flow into the fixed income space appealing to some investors, especially those who are risk-averse ahead of May inflation reports from NBS.
In any market condition, all you need is price because assets price trends in volatility, whether in low or high volatility, so when investing in the stock market, always approach it as a market of stocks, regardless of the environment or situation because there are always stocks showing leadership and trending higher. Here, you may have to look harder to identify them, and depending on current market conditions, there are always stocks that are going up. The same can be said for weak stocks, regardless of the environment or situation, there are always stocks that are traveling south too. So look for stocks with the best momentum and relative strength characteristics.
In the ongoing market reversal, following and trading prices action simply mean that the market tells you what to do and not the other way round because the price is always right as it does not care what 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 stop loss is not in use.
Oil prices rebounded powerfully in the international market as it oscillates to trade at $120.3 per barrel, after touching a two-month high of $123.80 on the reopening of China provinces locked down due to Covid 19, amidst Saudi Arabia’s July future price rise. There is also the fear of the possible birth of a cartel of oil consumers in a bid to keep prices down, despite the ongoing Ukraine-Russia war. Also, the EU plans to enforce the embargo on the importation of Russian oil, even 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.
The NGX index’s action has technically entered the markup phase, trading above the ‘T-Line’ and the 20-day moving average, as market remains strong, despite the mixed trend that started the month. The strong resistance level was the 53,281.32 basis points region, while volatility persists and uptrends towards the next breakout sported around 53,090.16.01bps. Should the index break this point, the next visible resistance is 53,161.27bps.
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, Monday’s trading opened slightly on the upside which was sustained throughout the session, despite oscillating on buying interest across the major sectors and high priced stocks, a situation that pushed the NGX’s index to an intraday high of 53,090.16bps from its lows of 52,889.13ps before closing above its opening points at 53,086.46 points.
Market technicals were positive and strong, as volume traded was higher than the previous day in the midst of breadth favoring the bulls on a positive sentiment as revealed by Investdata’s Sentiments Report showing a 98% buy position and 2% sell volume. The total transaction volume index stood at 1.87 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking up at 41.02pts, from the previous day’s 27.86pts, indicating that funds entered the market.
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Index and Market Caps
The week started on a positive note as the benchmark index NGXASI gained 178.62bps, closing at 53,086.46bps, after opening at 52,908.24bps, representing a 0.34% up. Similarly, market capitalization rose by N96bn, closing at N28.62tr, from the previous day’s N28.52tr, which also represented a 0.34% appreciation in value.
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Monday’ upturn was driven by demand for stocks like MTNN, FBNH, Conoil, NGX Group, Julius Berger, Eterna, UBN, Oando, Mansard and Learn Africa, among others. This impacted positive on Year-To-Date gain, which rise to 24.28. Market capitalization growth stood at N6.45tr YTD, representing a 28.35% rise over the opening level for the year.
Mixed Sector Indices
Performance indexes across sectors were mixed, as NGX Energy and Industrial Goods closed higher by 0.58% and 0.05% respective, while NGX Insurance led decliners after losing 0.44%%, followed by Banking and Consumer goods with 0.42%, and 0.12% respectively.
Market breadth returned positive, as gainers outnumbered losers in the ratio of 19:13; just as transactions in volume and value terms were up, with stockbrokers crossing 755.62m shares worth N8.90bn. Volume was driven by trades in FBNH, Flourmill, Wapic, Transcorp and Zenith Bank.
Conoil and Pharmdeko were the best-performing stocks of the session, gaining 9.97% and 9.38%, closing at N32.00 and N1.75 per share respectively on market forces. On the flip side, Japaul Gold and ABC Transport lost 6.25% and 6.06% respectively, closing at N0.30 and N0.31 per share, on profit-taking.
We expect the mixed trend to continue on bargain hunter cashing in on pullbacks reposition their portfolio ahead of economic data and interim dividend season, as audited account of March year-end companies are expected in the market. Just as funds are flowing to the fixed income market on the rate hike by CBN, as sector rotation persist on players digesting the macro-economic data and Q1 corporate earnings release, ahead of May consumer price index 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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