Mixed Trend May Linger On Bargain Hunting, As Investors Expect More Fiscal Policy Pronouncements

Market Update for July 6

Nigeria’s stock market maintained it bullish momentum and positive sentiment on Thursday, amid increased inflow that made it more liquid and attractive for wealth creation among discerning players that understand its dynamics and the changing trading environment.
The market confirmed midweek’s uptrend after forming a bullish piercing pattern as mentioned in our previous update, while the benchmark index’s action again formed a top pattern after breaking once more the 62,000 basis points psychological line. This was on a very high traded volume that signaled the entry of the markup phase by smart money, while the chart pattern supports a correction or pullback that also needs confirmation as the market opens Friday, being the last trading day of the week.
Sector rotation and portfolio reshuffling continued ahead of the half-year earnings reporting season and this month’s Monetary Policy Committee meeting. These 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.
The market surpassed the 62,000 mark, closing at 62,019.88 after touching 62,048.05 on a buying sentiment to continue trading at its 16-year market high on a huge traded volume. In the process, many stocks have continued to hit new 52-week highs on inflow of funds and an expected interest rates adjustment or pause in the coming Monetary Policy Committee meeting as the government looks to reform monetary policy after the recent removal of fuel subsidy and unification of foreign exchange rates that made equity prices cheaper and more attractive on the exchange for foreign investors.
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 $76.96 per barrel in the midst of 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, Thursday’s trading started on the upside and it was sustained for the rest of the session on buying sentiments across sectors and different classes of stocks, pushing the Index to an intraday high of 62,048.05bps, from its lows of 61,509.00ps, before closing above it opening points at 62,019.88point.
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 95% buy position and 5% sell volume. The total transaction volume index stood at 6.45 points, just as energy behind the day’s performance was strong, with Money Flow Index reads 85.48pts, from the previous day’s 80.22pts, indicating that funds entered the market.
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Index and Market Caps
The benchmark NGXASI, at the close of Thursday’s trading, gaining 496.31bps closing at 62,019.05bps, from its 61,523.57bps opening level, representing a 0.81% growth. Market capitalization also rose by N270bn to N33.77tr, from the previous day’s N33.50tr, which also represented a 0.81% appreciation in value.
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This upturn was driven by positioning in shares of Dangote Cement, UBN, Conoll, GTCO, Zenith Bank, Accesscorp, Presco, MRS Oil, PZ and Dangote Sugar among others. This impacted positively on Year-To-Date growth, reducing it to 21.01%, while Market Capitalization YTD gain dropped to N6.18tr, representing 20.98% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed in green, as NGX Energy led the advancers after gaining 2.38%, followed by Banking, Insurance Industrial and Consumer goods with 1.6%, 1.38%, 0.93 and 0.22% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 54:18, while activities in volume and value were up after investors exchanged 5.4 billion shares worth N95.0bn, driven by trades in, FBNH, FCMB, Accesscorp, Japaul Gold and Transcorp.
Learn Africa and Conoil were the best performing stocks, gaining 10% each, closing at N3.50 and N102.30 per share respectively, on positive market forces and sentiment. On the flip side, UPDC and International Energy Insurance lost 9.2% and 9.1% respectively, closing at N1.08 and N1.30per 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