Mixed Trend Yet As Dividends Support Interests, Investors Eye Sound, Defensive Stocks

Market Update for May 9
Tuesday’s trading activities on the Nigerian Exchange was mixed, continuing the positive outing of the market on a mixed sentiment and less than average traded volume, as the benchmark All-Share index closed marginally higher reflecting the effect of profit taking activities and top pattern candlestick formation that needs confirmation at midweek’s session.
Notwithstanding the mixed sentiments and slowdown in gaining momentum at the end of Tuesday, there is the increasing traded volume in banking stocks, among others signaling the presence of local institutional investors that are accumulating position in some stocks on the strength of high yields, impressive Q1 corporate earnings and expected audited accounts of March year-end companies. There is also the mixed macroeconomic environment amid the countdown to the May 29 inauguration of the new government which seem to be pro-market in disposition.
Market players in the current phase of the market are cautious and at the same time looking at fundamentally sound stocks and the future growth prospects, considering the various sectors and current prices. The prevailing low prices of many stocks due to their recent adjustments for dividend that has made them attractive for new entry and repositioning of portfolios in the midst of high inflation and improving economic activities, despite the high cost of funds.
The buying momentum on the exchange was strengthened as revealed by the decliners and advancers line amid demands for more stocks, a situation that sustained the composite index to trade above the T line and the 20-Day Simple Moving Average, heading to 50 EMA which stands as resistance level on a daily chart. This should guide technical traders and discerning investors. Looking at dividend yields and low market price to earnings ratio that provides better opportunity for investors to hedge against inflation even when fixed income market yields look attractive and remain mixed.
Also, there is the uncertainty of a rate crash by the incoming government as it moves to drive economic growth and development, even as we note the suspension of plans to remove fuel subsidy and postpone the population census, signaling the possibility of a policy shift. These may be a plus for the equity market on a likely financial market and economic reset. Market volatility remains at the extreme on positive sentiment as T-line turned support for index action ahead of the next market forces and positive statement.
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Oil price oscillation continued, even when it inched up to $76.88 per barrel in the midst of surprise inventory buildup, fear of recession and weak trade data from China, just as central banks rates hike is driving economic contraction in the face Ukraine attack. This is in addition to rising geopolitical tension 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 war that entered the second year. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, Tuesday’s trading opened on the downside and oscillated during the session, rebounding on buying interests in banking and energy stocks, even when some others witnessed profit taking, a situation that pushed the NGXASI to an intraday high of 52,658.89 basis points from its lows of 52,551.71ps, before closing above its opening level at 52,605.78bps.
Market technicals were positive and mixed with higher volume traded when compared to the previous session in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 50% buy position and 50% sell volume. The total transaction volume index stood at 1.17 points, just as impetus behind the day’s performance was strong as Money Flow Index reads 77.56pts, from the previous day’s 74.09pts, indicating that funds entered the market.
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Index and Market Caps
Tuesday’s session ended with the NGX All Share Index gaining a marginal 26.26 basis points to close at 52,605.78bps from its 52,579.52bps opening level, representing a 0.05% rise, just as market capitalization improved by N14.69bn to N28.64tr, from the previous day’s N28.63tr, which also represented a 0.05% value gain.
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The day’s upturn was driven by demand for the shares of Conoil, Transcorp, Champion, Multiverse, Ecobank Transnational Incorporated, International Energy Insurance, FCMB, GSK, Zenith Bank and GTCO among others, which impacted mildly on Year-To-Date gain as it increased to 2.64%. Market capitalization YTD gain rose to N355.17bn, representing 2.61% above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed with the NGX Consumer Goods and Insurance closing 0.73% and 0.22% lower respectively, while the NGX Energy led the advancers with a 1.12% gain followed by Banking with 0.76%.
Market breadth was positive as gainers outpaced losers in the ratio of 32:18, while activities in volume and value were mixed after investors exchange 640.97m shares worth N7.13bn, with volume driven by trades in Accesscorp, UBA, FBNH, Zenith Bank and NEM Insurance.
Conoil and Multiverse were the best performing stocks, gaining 10% each, to close at N48.40 and N3.75 per share, on impressive earnings and market forces. On the flip side, Unity Bank and Japaul Gold lost 9.26% and 8.82% respectively, closing at N0.49 and N0.31per share, purely on selloffs and profit taking.

Market Outlook
We expect mixed sentiments to continue on profit taking and payments for dividend to support buying interest, just as investors react to corporate earnings ahead of markdown dates, April inflation report, MPC meeting and dividend payments.
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