Mixed Trends Ahead, On Bargain Hunting, Realignments Ahead Of Earnings, Economic Data

Market Update for June 8

Profit-taking resurfaced again on the Nigerian Exchange at the midweek as traders cashed out from three trading sessions of positive outing, with the NGX All-Share Index closing lower on a low traded volume and negative breadth, thereby halting the positive momentum that started last Friday as sellers dominated the session.

This top pattern reversal that needs confirmation was attributed to the continued reactions to the rate hike by the Central Bank of Nigeria (CBN) at its Monetary Policy Committee meeting in May, amid concerns over the impending global economic recession. Also, all eyes are on global and domestic economic data, just as selling sentiments continue across some sectors, as funds flow into the fixed income instrument from risk-averse investors due to the increase in interest rate that followed the expected May inflation reports from the National Bureau of Statistics (NBS).

Market players should build and reposition their portfolios with Investdata Q3 master class, as market momentum changes ahead of the half year earnings reporting season and general elections. We note that the major political parties just concluded primaries to select their presidential candidates ahead of the February 2023 general election. Discerning investors are gradually being greedy, while others are fearful and actively buying more, as I have seen in recent times of market correction. Despite the selling sentiment witnessed at the close of Wednesday trading, It is time to go shopping for undervalued stocks, downtrodden sectors and the next insider playing opportunity.

In the ongoing market reversal, following and trading prices action simply means 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 whatever 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 continued to rebound powerfully in the international market, despite oscillating to $123.10 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 futures price rise, even as the news of US president’s visit to that country is not likely to solve the oil market problems or crash prices, for as long as the ongoing Russia-Ukraine war persists. 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 remained in its markup phase, trading above the ‘T-Line’ and the 20-day moving average, as the market remains strong, despite the mixed trend that started the month. The strong resistance level has been within the 53,774.20 basis points region, while volatility persists and uptrends towards the next breakout sported around 53,603.16.01bps. Should the index break this point, the next visible resistance is 53,734.27bps.

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.

Midweek’s trading opened slightly on the downside which was sustained throughout the session, despite oscillating on ‘buy’ interest and selloffs in the financial sectors and high priced stocks, a situation that pushed the NGX’s index to an intraday high of 53,276.66bps from its lows of 53,046.72ps before closing above its opening level at 53,270.88bps.

Market technicals were negative and mixed, as volume traded was lower than the previous day in the midst of breadth favoring the bears on selling sentiments as revealed by Investdata’s Sentiments Report showing a 96% sell position and 4% buy volume. The total transaction volume index stood at 0.63 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking up at 48.63pts, from the previous day’s 48.90pts, indicating that funds left the market.

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Index and Market Caps

The key performance index at the end of trading shed 76.90bps, closing at 53,193.98bps, after opening at 53,270.88bps, representing a 0.14% drop. Similarly, market capitalization fell by N42bn, closing at N28.68tr, from the previous day’s N28.72tr, which also represented a 0.14% value loss.

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This downturn was driven by selloffs and profit-taking in stocks like FBNH, ETI, Stanbic IBTC, UBA, Champion, NEM, and Accesscorp, among others. This impacted mildly on Year-To-Date gain, which to 24.53%. Market capitalization growth stood at N6.54tr YTD, representing a 28.53% rise over the opening level for the year.

Mixed Sector Indices

Performance indexes across sectors were mixed, as the NGX Consumer and Industrial Goods closed 0.12% and 0.03% higher respective, while the Insurance led decliners after losing 1.76%%, followed by Banking with 0.86%, while NGC Energy closed flat

Market breadth was negative, as losers outnumbered gainers in the ratio of 18:16; just as transactions in volume and value terms were mixed, after stockbrokers traded 248.96m shares worth N1.86bn, with volume driven by trades in Transcorp, Fidelity Bank, FBNH, Japaul Gold, and Chams,

Caverton and FTN Cocoa were the best-performing stocks after gaining 7.34% and 5.88%, while closing at N1.17 and N0.36 per share respectively on market forces. On the flip side, Champion Breweries and Cornerstone Insurance lost 9.79% and 9.68% respectively, closing at N3.50 and N0.56 per share, on profit-taking and selloffs.

Market Outlook

We expect a mixed trend after the recent bargain hunting that pushed the market up amid the continued portfolio repositioning ahead of economic data, and the interim dividend season, while audited accounts of March year-end companies begin to hit the market soon. We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists and players digest the macro-economic data and Q1 corporate earnings release. Analysts are also on the lookout for the 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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Theme: Profiting From Asset Pricing In An Uncertain Market, Rising Rates Environment

  1. The State of the Market & 2022H2 Opportunities: Looking at The Fundamental Mix, Alhaji Kurfi Garba MD/CEO Apt Securities & Funds Ltd
  2. Power of Price Action in identifying Opportunities in Any Market Cycle, , Mr. Abdul-Rasheed Oshoma Momoh, Head Capital Market at TRW Stockbrokers Ltd
  3. State of the Economy & Impact Doubling on Company Earnings in Negative Real Rate Of Return Environment. , Mr. Ambrose Omordion, Chief Research Officer, Investdata Consulting Ltd

Takeaway from the master class

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  5. Why all you need to make money in equity trading is price
  6. The strength of NGX sectorial indexes in picking profitable trades
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Smart investors and traders know that highly volatile markets create exceptional opportunities, while novice and amateur traders can often have a different response to volatility, which leads to FEAR.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdataonline.com

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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