Mixed Trends On Portfolio Reshuffling, Review Of Fiscal Developments, Earnings Inflow

Market Update for the Week Ended July 28 and Outlook for July 31-Aug 4

It was a policy meeting week for many central banks across the globe, with members them voting for 25 basis points rate hike to fight the rising inflation that had started to slowdown in some domains. These meetings were held in Indonesia, Nigeria, US, Europe and Japan, in the midst of the ongoing corporate earnings reporting season that had shaped the global equity market for the period. Many of these markets closed the week positive as players continued to digest the mixed numbers released so far and the recent macroeconomic data, alongside the outcome of these policy meetings.
Back home, the Nigerian central bank held its first MPC meeting since the new administration assumed office, and decided by a majority vote to sustain the hawkish posture of the western world, by further adjusting the Monetary Policy Rate higher by 25bps to 18.75%. This makes it the eighth consecutive increase, as the asymmetric corridor around the MPR was adjusted +100/-300bps from +200/-700bps, while Cash Reserve Ratio and Liquidity Ratio were left unchanged at 32.5% and 30% respectively. In the process the committee opted against heating up the system further, amidst the raging concerns over the ongoing economic reforms, which had piled pressure on prices and cost of doing business and living. We note that the rate hike has, so far, triggered a flow of funds into the other sides of the financial market as seen from the bearish disposition of the stock market resulting from profit taking and portfolio rebalancing that began since on Tuesday, which coincidentally was when the MPC concluded its two-day meeting.
Despite the mixed trend and performance on the Nigerian Exchange over the past week, more than 60 half-year corporate earnings report hit the market last week. The results were mixed with some posting surprising scorecards, while others came flat and disappointing. The scorecards included those of Ecobank Transnational Incorporated, Wema Bank, University Press, Africa Prudential, Ikeja Hotel, Transcorp, CAP, NEM Insurance, Total Energies, Livestock Feeds, Morison Industries, Berger Paints, NB, Guinness Plc, Learn Africa, Capital Hotel, Cutix, Redstar Express, Trans-nationwide Express, Transcorp Hotel, FCMB, MTNN, NB, Guinness, Nahco, Nascon, Chams and MRS Oil, among others.
Amid the seeming economic concerns and the changing fundamentals in Nigeria today, market players continue to sell off and take profit from the recent rallies, while some investors accumulate positions in stocks with strong earnings power and bright prospects in the face of policy changes and fiscal reforms. As investors realign their portfolios on the strength of the latest earnings released so far and in expectation of more numbers from the interim dividend paying banks on the exchange. Amid the pullback and correction witnessed during the week, many stocks have adjusted down from their 52-week highs again. This is coming ahead of assignment of portfolios to economic managers that would drive the new government’s vision in line with the expectations of Nigerians.
The NGX distribution phase or pullbacks at this point will add more strength to the recovery, as it creates opportunities for new entrants that trade value area using resistance and support levels, especially as the market is correcting from 66,017.90 basis points after forming a double top in the midst of expectation of more half-year corporate earnings from the banking, insurance, energy, telecoms, service providers and others. This is as foreign portfolio investors gradually return to the market on the back of the exchange rate unification that makes stocks on the NGX cheaper and more attractive, despite the current volatility in the FX market.
Also, in the light of a changing investment environment that definitely calls for new investing and trading strategies, there may be intermittent challenges particularly as the recent fuel subsidy removal and Naira devaluation come with fresh economic risks that would negativelu impact some sectors in the short-term. Investors have to navigate the terrain cautiously while ensuring that they protect their portfolios and still make profits. Discerning investors and traders should continue to reposition their portfolios, buy into defensive stocks to protect their trades, as sectorial rotation persists in a policy changing environment. Also noteworthy is the fact that the NGX’s Price-to-Earnings Ratio remains relatively low and attractive for investments, following which we foresee a mixed trend in Q3 and beyond on profit booking and buying interests.
To navigate the Q3 market volatility and the rest of the year’s mixed outlook profitably using fundamental and technical analyses to run, join investdata live sessions at noon every trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy. As volume of transaction witnessed within the week remain above the average traded volume, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
Oil price continued its bullish run for the fifth consecutive week, trading at $84.99 per barrel in the midst of rate hike by fed and positive economic date that signaled economic recovery in US. As China move to stimulate its economy and boost recovery that had been weak since the lifting Covid 19 restriction. We note the rising geopolitical tensions and supply disruptions due to the Russia-Ukraine war that has lingered for over a year now, and is indeed escalating. The up and down movement of oil prices also continues to drive volatility across different investment windows.

Movement Of NGXASI
The NGX sustained a bull dominance for the second successive week, despite recording a mix performance of two trading sessions of up market and three days of bearish sentiments on profit-taking in the midst of influx of corporate earnings, low traded volume and negative market breadth.
The week’s trading activities started on a positive note on Monday, extending the previous gains, as the NGX All-Share Index gained 0.41%, a situation that was sustained on Tuesday when the index, moved 1.11% northward, before closing 0.46% down at the midweek due to profit taking in some stocks. This was extended to Thursday and Friday when the market pulled back further by 0.31% and 0.65% respectively, reducing the week’s total gain to a marginal 0.02%, compared to the previous week’s 3.89% gain.
In all, the composite NGX All-Share index inched up by 53.00bps, closing at 65,056.39bps from the previous week’s 65,003.38bps, touching an intra-week high of 66,017.94bps from its lows of 64,892.11bps. Similarly, market capitalisation rose by N86.77bn, also representing a 0.02% appreciation in value, closing at N35.40tr.
The top advancers’ table was dominated by low and medium cap stocks, amidst profit taking and weak momentum, as volatility and portfolio reshuffling continued. Also notable was the selling sentiment, while investors assessed impacts of the new government’s policies on the economy. So far, market players are revealing the upside potentials and inherent value in some companies with strong earnings power and volume patterns ahead of more half year earnings reports. So, buying into value, strong earnings and high dividend payout companies remain the way to go, as price correction impacts positively on yields.
Market breadth for the week turned negative as losers outpaced gainers in the ratio of 39:54 on selling sentiments as revealed by investdata sentiment report showing 15% ‘buy’ volume and 85% sell position. Money Flow Index is looking up to read 89.08bps, from the previous week’s 85.21points, an indication that funds entered the market on a weekly chart. The candlestick formation of the market’snindex on a weekly time frame revealed a bearish pattern due to profit booking in blue chips mostly, and selloffs in highly priced stocks, amidst the hike in rates and yields in the fixed income market looking up. There is also Impacts of the ongoing economic reform of the new government.
The NGX index’s action sustained the trend, trading above the upper trend line of the bullish channel, and 65,000bps mark on a selling sentiment in the midst of more Q2 financials hitting the market and bearish divergence on the daily chart, while trading above the 100 DMA and 200 DMA on a low traded volume to sustain the uptrend on a weekly time frame that supports reversal and continuation of trend. This needs confirmation in the new week as more fundamental earnings are expected in the market. Also, the candlestick formation indicates that sellers are in charge in the midst of players digesting the recent earnings reports and rate hike impact on the financial market.

Bearish Sectoral Indices
Sectoral performance indexes witnessed a negative outing, except for the NGX Oil/Gas that closed 9.4% higher, while the NGX Consumer Goods led the decliners with 2.36%, followed by Banking, Insurance and Industrial goods with 2.20%, 1.6% and 0.31% respectively.
Activities in volume and value were down as market players traded 2.85bn shares worth N37.65bn, compared to the previous week’s 4.18bn units valued at N99.05bn. Volume was nonetheless driven by financial services, Oil/Gas and Conglomerates stocks. Specifically, volume was boosted by trading in shares of FBNH, Japaul Gold, UBA, Accesscorp and Transcorp.
Skyway Aviation Handling Company and Lasaco Assurance were the best-performing stocks, gaining 43.83% and 26.88% respectively, closing at N23.30 and N2.03per share on impressive Q2 numbers and market forces. On the flip side, the share prices of Cadbury and John Holt lost 26.76% and 23.08% respectively at N12.45 and N2.20 per share, as investors reacted to their unimpressive half-year results, leading to profit taking,

Outlook for the week
We expect the mixed sentiments to persist on profit taking and portfolio reshuffling, as market players digest corporate earnings released so far in the midst of more policy pronouncement and screening of ministers by the senate. These are coming in the midst of, corporate actions, price adjustment and payment dates. However, retracement to the 62,578.12bps level and below is possible on profit-taking as global and domestic events unfold.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605