Positive Sentiment Aheads, Amid Portfolio Realignments On Pullbacks Q2 Earnings

Market Update for August 28

The nation’s stock market opened the week on a positive note, as buying interest in blue chip companies continued, especially in the consumer goods sector which had supported the market in the previous week. The positive sentiment for BUA Foods and merger news of Dangote Sugar, Nascon and Dangote Rice continues to drive buying traffic in these companies and others. These supported NGX, despite the changing market conditions and trading environment as the nation’s Q2 GDP recorded a slow growth of 2.51%, against 2.31% posted in Q1 2023 and a decline when compared to previous year’s figure.
Despite the seeming weak performance for the period with our population growing faster than Gross Domestic P I’mroduct, as market players go after sectors that contributed the most to this growth. As such, you should start realigning your investment portfolios in that direction, at a time the market is set to breakout the consolidative range that serve as a distribution phase to usher in another markup phase, if this positive sentiment persist as the market opens on Tuesday. All eyes are on the prevailing yield in alternative market with rates and yields outlook remaining mixed due to rising inflation, high interest rate and weak macroeconomic indices.
The key performance NGX All-Share index closed higher on a less than average traded volume and positive market breadth, as the buying interest in the broader market improved at the end of Monday’s trading. The candlestick formation at the end of the day’s trading signals continuation, or reversal after the index had broken the strongest resistance of 66,000 level to test a new high of 66,185.04bps before it extended the uptrend for two sessions.
The current state of the market and economy calls for cautious trading in the absence of positive news, as first-tier banks continue to notify the exchange and investors of the delay in their audited half-year earnings reports that are expected to come with interim dividends. Smart traders and discerning investors are taking advantage of the market consolidation and new uptrend, after forming a descending triangle and flag to breakout the resistance level of 66,017.09 bps on a relatively low traded volume. It is the time to buy into valued stocks with strong fundamentals, as the market looks forward to a favourable news that will trigger yet another round of buying interests. Also noteworthy is the mixed outlook in the fixed income market, amidst portfolio repositioning and sector rotation on the strength of company earnings’ power.
These situations are to further guide the ongoing portfolio repositioning ahead of first-tier banks’ half-year earnings reports and end of the month. We know that the banking industry is a net beneficiary of foreign exchange revaluation gains that should support higher interim dividend payouts. So far, Accesscorp, Zenith Bank, UBA and Stanbic IBTC notified the exchange of a likely delay in the submission of their audited half-year results, even as all eyes are on the audited full-year financials of PZ, Flour Mills and Honeywell Flour for the periods ended May and March 2023 respectively.
The NGX index’s action is currently trading above the 66,000 basis points, ‘T line’ and 50-day moving average, attracting bargain hunters to position in fundamentally sound medium and low cap stocks amidst digesting of scorecards of many companies and prevailing macroeconomic factors including exchange rates, yield in money market and Q2 GDP. It is therefore time to use technical tools, if you have been ignoring charts and fighting the trends, it is your chance to step up your game. It is pertinent to stress the fact that profit taking is part of market dynamics, which can occur at any time, as we look forward to a mixed outing and intermittent profit taking, since policy factors that pushed the market up are shaking, as market wait for favorable news and statements from the minsters.
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Oil price oscillation continued, as it inched up marginally to trade at $83.89 per barrel in the midst of contracting global economy as revealed by PMI and fear of rate hike in the face of second wave of inflation. The Russia-Ukraine war remains a major concern, the prevailing high interest rate regime and slowing inflation. 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.
Monday’s trading started in the upside and it was sustained, despite oscillating for the rest of the session on buying interests in consumer, industrial goods stocks and others. This situation pushed the Index to an intraday high of 66,165.04 bps from its lows of 65,558.91bps, before closing above the opening points at 66,151.38bps.
Market technicals were positive and mixed with a lower volume traded when compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 98% buy position and 2% sell volume. The total transaction volume index stood at 0.65 points, just as the momentum behind the day’s performance was strong, with Money Flow Index reading 64.50pts, from the previous day’s 64.53pts, indicating that inflow into the market was flat.
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Index and Market Caps
The benchmark NGXASI, at the end of Monday gained 325.19bps, closing at 66,151.38bps, from its 65,558.91bps opening level, representing a 0.90% growth. Market capitalization rose by N324billion to N36.21tr, from the previous day’s N35.88tr, which also represented a 0.90% appreciation in value.

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Meanwhile, the day’s upturn was driven by accumulation in the shares of BUA Foods, Dangote Sugar, Nascon, Transcorp, Wapco and CHI Plc, among others. This impacted positively on Year-To-Date growth, which increase to 29.07%, while Market Capitalization YTD gain went up to N6.53tr, representing a 28.29% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Banking and Insurance closed lower by 0.90% and 0.35% respectively, while the NGX Consumer goods led the advancers after gaining 5.86%, followed by Industrial goods with 0.03%, Just as NGX Energy closed flat.
Market breadth was positive as gainers outpaced losers in the ratio of 34:23, while activities in volume and value were mixed after investors exchanged 311.12m shares worth N3.92bn, driven by trades in Accesscorp, Transcorp, Dangote Sugar, Chi Plc and Omatek.
Transcorp and Dangote Sugar were the best performing stocks, gaining 10% each, closing at N6.38 and N52.25per share each, on market forces and proposed merger news. On the flip side, CWG and John Holt lost 10% and 9.80%, closing at N4.50 and N1.38 per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect positive sentiment as portfolio realignments end of the month window dressing in the midst of bargain hunting and mixed outlook for money market yields ahead of first tier banks earnings reports expectation and sector rotation persists.
However, pullbacks are creating buying opportunities amidst economic reforms of the government, just as more policy pronouncements and economic managers hit the ground running, a situation expected to offer investment direction eventually.
We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price rally to take profit, while also looking at the trends and events across the globe and domestically.

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