Market Update for May 4
The bull rampage and buying interest on the Nigerian Exchange continued after the holidays as the new month started on a positive note, consolidating the uptrend witnessed in April on a very high traded volume and positive market breadth. This was driven by sector and portfolio rotations on the strength of the recently released Q1 corporate earnings that beat market and analysts’ expectations. Consequently, the bull transition was extended for the 15th consecutive session as market players digested the impressive numbers ahead of macroeconomic indices expected to hit the market this month.
The bullish trend was attributed to investors increased buying interests in medium and high cap stocks across some major sectors, while the NGX index action broke out 50,000 psychological line, while market capitalization hit an all-time high of N27tr, revealing a wave of wealth creation for investors in the market. Also, players are keenly observing what is happening on the nation’s economic front, in the face of a marginal uptick in the long tenored Central Bank of Nigeria’s Treasury Bill at the end of last week’s primary market auction, a situation that failed to negatively impact the flow of funds from the equity space, as investors and traders seek to hedge against the spiraling inflation. Stakeholders are, however, anxiously awaiting the plans by the CBN to intervene in the petrol products sector, which as announced is targeted at making premium motor spirit and diesel available, thereby easing the pain of manufacturers, SMEs and households across the country, in the face of the epileptic power supply.
There were positive and buying sentiment at midweek’s session in the face of huge volume movement, as traders and investors accumulate more blue-chips on the strength of their earnings power. Tentatively, the continued mixed direction of fixed income market yields and TB rates may continue supporting the flow of funds into equities, on a strong demand for stocks in this prevailing uptrend and positive sentiment amidst the ongoing war in Ukraine that has influence the global markets in recent times.
Noteworthy also is the rebound in oil price above $110 per barrel at the international market, resulting from the further EU embargo on importation of Russia oil, ahead of OPEC’s meeting on Thursday, despite the resurgence of the Covid 19 in some province in China that had led to lockdown in these areas. Crude oil prices are pushing production costs up, heightening inflationary pressure across the globe on a weak economic outlook, thereby influencing the monetary policy of central banks as they move to checkmate impacts of the Russia-Ukraine conflict on the global economy to avoid global recession. The uptick in domestic inflation is a potent threat to the fixed income market and investment yields, which should be an indication that more funds may likely flow into the equity space as institutional investors balance their portfolios.
The strong momentum, buying interests and increased liquidity at this point has created ‘buy’ signals for discerning traders as smart money makes efforts to push up the equity prices. However, we warn that market corrections are underway as a result of profit taking, hence the need to rely on your stop-loss effectively at this point, even as oscillating trend signals that a major uptrend is underway, especially when the high cap stocks that control 70% of market capitalisation move up ahead of reactions to their earnings and expected dividend payments in May and June 2022.
Midweek’s candlestick formation at close of trading revealed buyers are in charge, a situation that may likely be a continuation of trends, or reversal, depending on market forces. The NGX index’s action sustained it uptrend to breakout 50,070.30 basis points and remain in the markup phase, trading above the ‘T-Line’ and 20-day moving average. The market remains strong as it heads towards the strong resistance 50,500bps region level, as volatility persists and uptrend towards the next breakout is sported around 50,212.17bps. Should the index break this point, the next visible resistance is 50,301.72bps.
Technically, the NGX index action has broken out on impressive earnings and strong demand for stocks. The possibility of the market sustaining this trend is high as a function of stronger corporate earnings and improved economic condition during this season, following which we advise investors to play defensive stocks to reduce investment risks around the market.
Meanwhile, Wednesday trading opened on the upside and was sustained throughout the session, despite oscillating on buying interests in blue-chips companies and profit taking, a situation that pushed the NGX’s index to an intraday high of 50.172.54bps, from its lows of 49,638.75bps, before closing above its opening point at 50,126.41bps.
Market technicals were positive and strong as volume traded was lower than the previous day’s in the midst of breadth favouring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 94% ‘buy’ volume and 6% ‘sell’ position. Total transaction volume index stood at 2.96 points, just as momentum behind the day’s performance remained strong with Money Flow Index looking up at 90.38pts, from the previous day’s 86.573pts, indicating that funds entered the market.
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Index and Market Caps
The composite index NGX All-Share Index gained 487.47bps when trading closed at 50,126.41bps, after opening at 49,638.94bps, representing a 0.98% growth. Similarly, market capitalization rose by N262.89bn, closing at N27.02tr, from the previous day’s N26.76tr, which also represented a 0.98% appreciation in value.
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Midweek’s upturn was driven by accumulation in Okomu Oil Palm, Presco, NB, BUA Cement, Vitafoam, Fidson, Cadbury, Guinness, Eterna, and Unilever, among others. This impacted positively on Year-To-Date gain, which increased to 17.35%. Market capitalization growth stood at N4.48tr YTD, representing a 20.17% rise over the opening level for the year.
Mixed Sector Indices
Performance indexes across sectors were mixed, as NGX Insurance, Energy and Banking closed lower by 3.77%, 1.37% and 0.98% respectively, while NGX Consumer goods led the advancers after gaining 3.30%, followed by industrial goods with 2.97%.
Market breadth was positive, as advancers outnumbered decliners in the ratio of 31:27; just as activities in volume and value terms were down, after investors exchanged 669.30m shares worth N5.99bn. Volume was driven by trades in UBN, Transcorp, Aiico, Chams and Accesscorp.
Okomu Oil and Wema Bank were the best-performing stocks for the session, gaining 10% each, closing at N161.70 and N3.85per share respectively on impressive Q1 numbers and market forces. On the flip side, Oando and Trans nation-wide Express lost 10% and 9.88% respectively, closing at N5.67 and N0.73 per share, on profit taking and selloffs.
We expect positive trend to continue on sector and portfolio rotations as players digest the better-than-expected Q1 corporate earnings released so far, ahead of March year end 2022 audited financials with dividend announcements to support uptrend in the new month as oil prices rebounded. Also, the market continues to interpret economic data in relationship with 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, as 2021 Q4 GDP up at 3.98%, while the International Monetary Fund has projected the nation’s economy to grow by 3.4% on rising oil price in the international market.
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