Mixed Trend Yet Amid Bargain hunting, Profit Taking, Portfolio Realignments, Fiscal Reforms

Market Update for July 5

Midweek’s trading activities on the Nigerian Exchange rebounded on renewed buying interests and positive sentiments, halting previous session’s profit taking and losses, thereby forming a piercing pattern that can serve as a potential signal or indicator for a bullish reversal. However, with the declining volume in the past three trading sessions and momentum slowing down, investors and traders should wait for a breakout of the recent strong resistance level of 61,949.24 to confirm a new uptrend, if possible on a higher volume.
Also, portfolio repositioning and sector rotation continued ahead of the half-year earnings reporting season and this month’s Monetary Policy Committee meeting. These are 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.
In the face of NGX rebound and expected uptrend or mixed performance, investors should know that profit taking is part of market dynamics. As such, 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 is heading back to the 62,000 mark after retracing up to breakout the psychological line of 61,000 again on a buying sentiments to continue trading at its 16-year market high on a less than average 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 MPC 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 recorded a positive performance as the bull resurfaced on buying interests among low, medium and high cap stocks, especially 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 rebound to trade at $76.38 per barrel in the midst of plan output cut Russia and falling inventories. Just as the fear of global recession persist on rate hike and mixed macroeconomic data from 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.
Midweek’s trading opened in the green and was sustained throughout the session on rekindled buying sentiments across sectors and different classes of stocks, pushing the Index to an intraday high of 61,572.41bps, from its lows of 60,705.92ps, before closing above it opening points at 61,523.574point.
Market technicals were positive and mixed with a lower 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 94% buy position and 6% sell volume. The total transaction volume index stood at 1.24 points, just as energy behind the day’s performance was strong, with Money Flow Index reads 80.22pts, from the previous day’s 80.66pts, indicating that funds in the market was flat.
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Index and Market Caps
At the end of trading, the composite index NGXASI gained 808.77bps closing at 61,523.57bps, from its 60,715.04bps opening level, representing a 1.33% growth. Market capitalization also rose by N440bn to N33.50tr, from the previous day’s N33.06tr, which also represented a 1.33% appreciation in value.
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Meanwhile, the upturn was driven by positioning in shares of BUA Cement, NB, MTNN, GTCO, Zenith Bank, Accesscorp, Presco, Conoil, and UBA among others. This impacted positively on Year-To-Date growth, reducing it to 20.04%, while Market Capitalization YTD gain dropped to N5.74tr, representing 20.01% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed higher, save for NGX Insurance that closed lower by 4.7%, while NGX Banking led the advancers after gaining 6.2%, followed by Industrial goods, Energy and Consumer with 3.9%, 0.20% and 0.10% respectively.
Market breadth turned positive as gainers outnumbered losers in the ratio of 43:30, while activities in volume and value were down after investors exchanged 846.3m shares worth N10.3bn, driven by trades in, FBNH, Transcorp, Accesscorp, FCMB and UBA.
Learn Africa and Golden Breweries were the best performing stocks, gaining 10% each, closing at N3.20 and N2.21 per share respectively, on positive market forces and sentiment. On the flip side, NSL Tech and Lasaco lost 10% each, closing at N0.27 and N2.07per 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