NGX Set To Defy ‘Sell In May’ On Policy Statement, Amidst Strong Buying Sentiments

Market Update for May 30

The power of government policy statement was obvious on the Nigerian Exchange Tuesday as trading for the week started with strong gains and bullish sentiments, following the peaceful transition of power to the new administration’s pro-market policy statements. This triggered an increased buying interest in the hope that policies will impact positively on major sectors of the economy and the market, as the new government unfolds its strategies and agenda to achieve all that were promised.
Tuesday’s market performance was in line with the historical trend and pattern of first trading day after the smooth inauguration of the new administration, as the benchmark NGX All-Share index closed significantly higher. In the process, it broke out various psychological lines of 53,000, 54,000 and 55,000 points, while heading to a 16-year market high on a very high traded volume and strong positive market breadth, after many stocks broke out their 52-week highs on strong buying sentiment and expectation from the government.
All classes of equities on the exchange witnessed a rally on the inflow of funds as investors and traders took position in low, medium and high cap stocks, even as many more announce their Annual General Meetings details on the exchange, as their dividend payment dates draw near. These supported the ongoing dividend income reinvestment in the market arena that had equally enhanced liquidity in the equity space, coupled with the better-than-expected Q1 numbers. These should guide investors on how to reposition their portfolios ahead of Q2 earnings reporting season, as quoted companies started notifying the exchange and investing public of their closed period and board meeting dates to approve first half financials. Also, all eyes are on audited financials of March year-end companies.
The market is currently trading above its 50-Day Simple Moving Average and 100DMA after the golden cross on the daily and weekly chart, while heading to breakout 56,684 basis points level, as the market digests the policy statement of the new president and stocks making new highs to formed double tops. This calls for caution and profit taking, so let technical traders and discerning investors be guided, because higher prices will lead to low 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. Market volatility remains at the extreme on positive sentiment as T-line turned support for index action ahead of the next market forces and statement.
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Oil price oscillation continued, as it pulled back again to trade at $73.44per barrel in the midst new Russia deals with some Asia nations ahead of OPEC meeting next week, even when fear of fed rising rates again in June in the face of US debt ceiling debate. As China economic recovery remain weak in the midst of central banks rates hike that is driving economic contraction. Just as Ukraine and Russia war continued. 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 conflict that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Meanwhile, Tuesday’s trading opened sharply in the upside and it was sustained throughout the session, on increased positioning across all sectors, a situation that pushed the NGX All-Share Index to an intraday high of 55,745.74bps, from its lows of 52,973.88ps, before closing significantly above it opening figure at 55,745.74 point
Market technicals were positive and strong with a higher volume traded when compared to the previous session in the midst of breadth favoring the bulls on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 1.68 points, just as momentum behind the day’s performance was strong, with Money Flow Index reads 78.10pts, from the previous day’s 76.84pts, indicating that funds entered the market.
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Index and Market Caps
The key performance NGXASI, at the end of Tuesday’s trading gained 2,771.85bps, closing at 55,745.74bps, from its 52,973.88bps opening level, representing a 5.22% growth, just as market capitalization rose by N1.51tr to N30.35tr, from the previous day’s N28.84tr, which also represented a 5.22% appreciation in value.
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Tuesday’s upturn was driven by high demand for stocks like Zenith Bank, GTCO, UBA, Accesscorp, Total, Conoil, Unilever, FCMB, NB, Eterna and Sterling NG among others, which impacted positively on Year-To-Date gain, that increased to 8.76%. Market capitalization YTD gain went up to N2.35 trillion, representing 8.73% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed in green, led by NGX Banking after gaining 8.20%, followed by Consumer, Industrial goods, Energy and Insurance with 6.48%, 6.08%, 4.04% and 2.29% respectively.
Market breadth was strongly positive as gainers outpaced losers in the ratio of 66:11, while activities in volume and value were up after players exchanged 1.08bn shares worth N15.80bn, driven by trades in, Accesscorp, FBNH, Transcorp, UBA and GTCO.
Zenith Bank and Eterna were the best performing stocks, gaining 10% each, closing at N29.70 and N7.70 per share, on positive market forces and sentiment. On the flip side, Ikeja Hotel and NCR lost 10% and 9.80% respectively, closing at N2.16 and N2.76per share, purely on profit taking.

Market Outlook
We expect the positive sentiments to continue in the midst of profit taking and portfolio realignment as investors digest the president policy statement and latest macroeconomic data, even when dividend reinvestment supports market liquidity in the midst of markdown dates and expected March year end audited accounts.
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