Market Update for the Week Ended July 7 and Outlook for July 10-14

Trading in the first week of July closed positive on the Nigeria Exchange with very high traded volume and positive sentiment for the seventh consecutive session, to confirm the NGX’s bullish status, as year-to-date gain stood at 23% amidst the seeming profit taking and price adjustment for dividend.
The fast approaching half-year earnings reporting season added to factors driving the up market, even as there is high hopes that more policy statements would be unveiled by the President Bola Tinubu government in the coming weeks. This is aside the high hope that the unveiling of the much awaited ministerial list by the new government would add momentum to the ongoing market supportive reforms.
After breaking out the recent resistance level of 61,949.24 basis points, the NGX’s index action has formed a bullish divergence on the daily and weekly time frame, a situation that needs confirmation in the new week. This is based on the market momentum currently signaling that either a continuation of trend or pullback on profit taking.
Any market correction at this point will add more strength to the recovery and create opportunity for new entrance, as Q2 corporate earnings are expected to beat expectations, as foreign portfolio investors gradually return to the market on the back of the ongoing economic reforms, especially unification of the exchange rate that makes the stocks on the Nigerian Exchange cheaper and more attractive.
Also, in light of the 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 risk and some sectors in the short-term. Investors have to navigate the terrain cautiously while ensuring that they protect their portfolios and still make profits. We note that effects of the new government’s policies and reforms have started reflecting on the Purchasing Managers Index as it slipped in June to 53.8 points from May record of 54 points, indicating the slowdown in business activities as a result of higher prices and production costs in the face of dwindling purchasing power. These may affect company performances, depending on the nature of their services and products.
In the face of the changing fundamentals of the economy and government’s policy, outlook for the second-half of this year remains mixed, hence the need for cautious optimism regarding increased capital imports and foreign investment which may help reduce inflationary pressure. However, this month’s meeting of the Monetary Policy Committee (MPC) will give direction on interest rates, as June inflation is expected to jump higher due to the ongoing reforms. But in the midst of these discerning investors and traders continue to reposition their portfolios, positioning in defensive stocks to protect their trades, as sectorial rotation persists in a policy changing environment. We expect mixed trading and position taking in the days ahead, especially before the 2023 Q2 earnings reporting season kicks off.
During the week, Dangote Cement informed the exchange of its share buyback approved earlier in the year, while others notified investors of insiders’ dealings in their shares, especially Zenith Bank, Initiates Plc, and others. This should be interpreted as a vote of confidence by these board members and top management staff who see inherent value in their companies, hence their repositioning therein. This should guide investors and traders as they watch the market and take investment decisions.
Also, last week, the share prices of Lasaco Assurance, Ikeja Hotel, IMG and Living Trust Mortgage Bank were adjusted for dividend of 0.15 kobo, 7 kobo, 40 kobo and 1 kobo respectively, just as portfolio rebalancing and positive sentiments reflected on market breadth during the period, as more stocks closed green. 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 Q3 market volatility and the rest of the year mixed outlook profitably using fundamental and technical analysis 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, while others are fearful, as seen in the recent market correction. 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 during the week continued its oscillation, closing lower at $78.47 per barrel in the midst of trade balance of US and Venezuela, proposed output cut by OPEC as been pushed by Saudi and Russia. In the face of rising geopolitical tensions across the globe and supply disruptions due to the Russia-Ukraine war that has lingered for more than 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
It was another bullish week that started the second half of the year, as the NGX recoded four trading sessions of up market and a day pullback on profit-taking in the midst of bull transition for the seventh consecutive week on a strong positive market breadth.
Trading for the period opened on a positive note Monday, extending the previous gains as the benchmark index NGXASI gained 1.56%, a situation that was short-lived on Tuesday when the index suffered a 1.99% pullback on selloffs and profit booking across low, medium and high cap stocks. There was a rebound by the midweek when the index chalked 1.33%, which was sustained Thursday and Friday when the market inched 0.81% and 1.65% up respectively. This bought the week’s total gain to 3.40%, compared to the previous week’s 2.98% positive position.
In the process, the NGXASI gained 2,072.14bps, closing at 63,040.41bps from the previous week’s 60,968.27 points level, touching an intra-week high of 63,040.87bps, from its lows of 60,705.92bps. Similarly, market capitalisation rose by N1.13tr, also representing a 3.40% value gain at N34.33tr, from the previous week’s N33.20tr.
In the week under view, low and medium cap stocks dominated the top gainers’ table amidst buying interests and profit taking, just as volatility and portfolio repositioning continued. Also notable was the mixed sentiments on daily basis, as investors reassess impacts of the new government’s policies on the economy and industries. So far, first quarter earnings position from different sectors reveal inherent value in some companies with strong volume patterns ahead of their half year earing reports. So, buying into value, strong earnings and high dividend payout companies remain the way to go, despite the new prices impacting negatively on yields.
Market breadth for the week stayed positive as gainers outpaced losers in the ratio of 78:25 on a buying pressure as revealed by investdata sentiment report showing 100% ‘buy’ volume and 0% sell position. Money Flow Index is looking up to read 75.49bps, from the previous week’s 64.16points, an indication that funds entered the market on a weekly chart to reflect position taking in blue chip stocks and others in the market, in the face of mixed outlook for fixed income market yields and economic reform of the new government.
The NGX index’s action remained strong, trading above the 63,000 mark on positive sentiment in the midst of buying interests and bullish divergence on a weekly chart, while trading above the 100 DMA and 200 DMA on a high traded volume to sustain the uptrend on a weekly time frame that supports reversal and continuation of trend, which need to be confirm in the new week as pending financials are expected in the market. Also, the candlestick formation indicates that buyers are in charge ahead of earnings reporting season and MPC meeting that is around the corner.

Bullish Sectoral Indices
The sectorial performance indexes for the week closed higher, except for NGX Consumer Goods that closed lower by 0.22%, while NGX Banking led the advancers after gaining 9.82%, followed by Energy, Industrial goods and Insurance with 7.18%, 2.22% and 0.73% respectively.
Transactions in volume and value rose as investors and traders exchanged 9.83bn shares worth N145.41bn, compared to the previous week’s 3.37bn units valued at N41.99bn, driven by financial services, Conglomerates and ICT stocks. Specifically, volume was boosted by trading in the shares of FBNH, FCMB, UBA, Accesscorp and Transcorp.
Japaul Gold and CHI Plc were the best-performing stocks last week, gaining 58.57% and 57.32% respectively, closing at N1.11 and N1.29 per share on market sentiment and forces. On the flip side, the share prices of Wapic and Tripple Gee lost 26.51% and 26.40% respectively, at N0.61 and N2.76 per share, purely on profit taking and selloffs,

Outlook for the week
We expect a mixed sentiment on profit taking and buying interest as ongoing economic reforms, ahead of half-year earnings reporting season. These are coming in the midst of expected policy guideline and implementation, corporate actions price adjustment and payment dates. However, retracement to the 60,578.12 level and below is possible on profit taking as global and domestic events unfold.

Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08179547605