Portfolio Reshuffling May Linger, Ahead Of Interim Dividends, As Investors Digest March Financials

Market Update for July 4

Mixed sentiments and portfolio realignments continued on the NGX Exchange Monday, ahead of the half-year earnings reporting season for those with December 31, year-ends, as the week started on a marginal decline, halting two successive sessions of bull transitions on a low traded volume and negative breath. Consequently, trading for the month of July started on a flat note. July has been a very dicey month on the exchange, known for mixed trend and sentiment over the years.

Historic data reveals that in the past eight years, the month has been down in six times and up in just two years- 2018 and 2020, despite being the Q2 earnings reporting month. With the changing market dynamics and trading environment we look forward to a mixed month, as factors that kept the market on its oscillating trend remain unchanged, amidst expectation of interim dividend paying corporate earnings and others to be game changers as we go into the month with increasing political activities ahead of 2023 general elections.

To navigate the month profitability using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “as the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent range market. Despite the selling sentiment witnessed at the close of Monday trading, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

Technically, the NGX index action is at the distribution phase and is making sideways movement on a daily time frame, supported by bargain hunter’s activities to sustain the trend ahead of financial news. Daily candlestick formation as we go into the month will give direction as to what we should do and expect in Q3, just as more insights into the entire second-half will unfold. Market recovery at this point may be powerful depending on the state of the expected corporate and economic numbers, although with the possibility of maintaining what we saw in 2021 and the Q1 corporate earnings, as portfolio rebalancing and sector rotation continue.

Market players are implored to watch the price actions, which simply mean that the market tells you what to do, and not the other way around, because the price is always right and 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 a stop loss is not in use.

Oil prices rebounded slightly in the international market to trade at $113.90 per barrel, after the west rushed to curb Russian oil revenue without increasing prices, even amidst fear that oil markets could face a doomsday scenario this week or beyond, if OPEC has enough capacity to avoid supply problem as long as the ongoing Russia-Ukraine war persists. Also, the G7 nations plan to cap price Russian oil, 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.

Technically, the NGX index action is yet to confirm the decline phase of the market, as it trades slightly below the ‘T-Line’ and above the 50-day moving average, with the market remaining strong, despite the flat position. The strong resistance level has been within the 52,000 basis points region, while volatility persists and correction towards the next breakdown is sported around 51,591.27bps. Should the index break this point, the next visible support is 51,423.75bps.

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.

Monday’s trading opened slightly on the upside and oscillated throughout the session on profit-taking and selloffs in blue chip companies and low cap stocks, a situation that pushed the NGX’s index to an intraday low of 51,687.23bps from its highs of 51,827.56ps before closing marginally below its opening points at 51,791.45bps.

Market technicals were negative and mixed, as volume traded was higher than the previous day in the midst of breadth favoring bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 75% sell position and 25% buy volume. The total transaction volume index stood at 0.75 points, just as momentum behind the day’s performance was relatively weak as Money Flow Index is looking up at 32.00pts, from the previous day’s 24.72pts, indicating that funds entered the market.

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Index and Market Caps

At the end of the session, the NGX All-Share index fell by 38.11bps, closing at 51,791.45bps, after opening at 51,829.67bps, representing a 0.07% drop. Similarly, market capitalization fell by N20.61tr, closing at N27.92tr, from the previous day’s N27.94tr, which also represented a 0.07% value loss.

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The session’s downturn was driven by selloffs in Conoil, Redstart Express, Lafarge Africa, NB, Cutix, Accesscorp, FBNH, Mansard and United Capital, among others. This impacted mildly on Year-To-Date gain, dragging it to 21.24%, while market capitalization growth stood at N5.51tr YTD, representing a 24.73% rise over the opening level for the year.

Mixed Sector Indices

Performance indexes across sectors were mixed, as the NGX Banking and Insurance closed higher with 0.17% and 0.14% respectively, while the NGX Consumer goods   led the decliners after losing 0.94%, followed by Energy and Industrial goods with 0.35% and 0.12% respectively.

Market breadth was negative, as losers outnumbered gainers in the ratio of 18:17; just as activities in volume and value terms were up, after players exchanged 194.12m shares worth N2.82bn, with volume driven by trades in Transcorp, GTCO, UBA, AIICO and FBNH.

Fidson Healthcare and Learn Africa were the best-performing stocks after gaining 9.82% and 9.78% while closing at N12.30 and N2.47 per share respectively on market forces. On the flip side, Conoil and Redstar Express lost 9.90% and 9.09% respectively, closing at N25.95 and N2.50 per share, on profit taking and selloffs.

Market Outlook

We expect portfolio reshuffling to continue, ahead of the interim dividend season and second-half of the year, while Investors digest March audited accounts released. 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 Q4 unaudited earnings released so far. Analysts are also on the lookout for the inflation rate of 17.71% 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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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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