Mixed Trend May Linger, As Investors Bet On New Govt Policies For Market Direction

Market Update for June 7

The seesaw movement of the Nigerian Exchange’s benchmark All-Share index resurfaced at midweek to keep the market at its critical level, despite the seeming breakout recorded in the previous session on a low traded volume. The index pulled back marginally to halt Tuesday’s gain on a mixed session of profit taking, selloffs in highly priced stocks and others to form a top chart pattern that supports reversal. This requires confirmation as trading opens today.
The bearish divergent from the momentum indicators continued even while trading above its new psychological line of 56,000 basis points. Transaction volume remains below recent average in the midst of positive market breadth and selling sentiment in the absence of fundamental news with market players locking in gains that were driven by the inaugural speech of President Bola Tinubu. Others are, however, positioning on expected policy pronouncements, guidelines and appointments of economic managers to give a clear direction of the market in the medium to long term, as the market looks forward to the Consumer Price Index report for the month of May, and Q2 earnings reporting season in July.
The NGX index’s action remained at its distribution phase to signal cautious trading, even as traders and investors wait to confirm the new trend from this ranging pattern at its 16-year high, in the midst of a dicey outlook for the month of June. Historically, the month has been known for profit taking and selloffs for portfolio repositioning ahead of the half-year earnings season when positioning takes place for Q3 in the second half of the year. Meanwhile, more companies continue to notify the exchange and investing public of their AGM resolutions and closed period for half year financials. Just as the market earnestly awaits the audited financials of March year-end companies.
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Oil price continued its oscillation, as it retraced up to trade at $76.89 per barrel in the midst of global economic slowdown and fears that the Feds could raise rates again in this month, in the face of economic contraction and possible recession due to central banks rates hike. Just as Ukraine and Russia war continued. This is in addition to rising geopolitical tensions 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 conflict that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Midweek trading started slightly in the upside and oscillated for the rest of the session on selloffs in blue chip stocks and large cap companies, while some are taking positions also in some stocks. The situation pushed the NGXASI to an intraday low of 56,006.80bps, from its highs of 56,089.52ps, before closing slightly below it opening figure at 56.025.56 point.
Market technicals were negative and mixed 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 23% buy position and 77% sell volume. The total transaction volume index stood at 0.62 points, just as energy behind the day’s performance was strong, with Money Flow Index reads 81.08pts, from the previous day’s 81.78pts, indicating that funds left the market.
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Index and Market Caps
The NGXASI at the close of Wednesday’s trading shed 13.29bps, closing at 56,025,56bps, from its 56,038.85bps opening level, representing a 0.02% drop, just as market capitalization fell by N7.8 billion to N30.51tr, from the previous day’s N30.51tr, which also represented a 0.02% value loss.
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Meanwhile, the session downturn was driven by profit taking and selloffs in the shares of Airtel Africa, GTCO, UBN, Flourmill, Wapco, NGXGroup, Zenith Bank and FBNH among others, which impacted mildly on Year-To-Date gain that slight down to 9.31%. Market capitalization YTD gain reduce to N2.90 trillion, representing 9.28% above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Insurance and Energy closed 3.61% and 0.42% higher respectively, while the NGX Banking led the decliners after losing 0.25%, followed by Industrial and Consumer goods with 0.02% and 0.01% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 31:12, while activities in volume and value were up after stockbrokers traded 397.62 million shares worth N6.54bn, driven by trades in, NPF Microfinance, GTCO, Japaul Gold, Fidelity Bank and Accesscorp.
Honeywell Flour and Eterna were the best performing stocks, gaining 9.87% each, and closing at N3.45 and N12.25 per share, on market forces and sentiments. On the flip side, UBN and Flourmill lost 8.86% and 4.20% respectively, closing at N7.20 and N33.10per share, purely on profit taking.

Market Outlook
We expect the mixed sentiments and trend to continue until fundamental news and policy implementation guidelines of the government to give market direction, as portfolio realignments persist in the face of bearish divergence in market technicals, in the midst of markdown dates, dividend payment and expected March year end audited accounts.
We note that discerning investors have continued to target fundamentally sound companies 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 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