Market Update for the Week Ended June 23 and Outlook for June 26-30

The nation’s stock market sustained its bullish upbeat in the face of profit taking and mixed sentiments last week thereby extending its positive outing for the fifth successive week on a high traded volume and increased position taking across the major sectors. This was despite selloffs in some stocks that recently rallied due to market reactions to recent policy statements by President Bola Tinubu, especially the ongoing market supportive reforms.
We note that the NGX’s benchmark index has formed a bearish divergence on the daily time frame, looking at the market momentum which is signaling that either a correction or pullback is underway. This will enable the market gather more strength to breakout its recent strong resistance level, especially if the Q2 corporate earnings expected beat expectations, as foreign portfolio investors gradually return to the market on the basis of the economic reforms and unification of the exchange rate that makes the stocks on the Nigerian Exchange cheaper and attractive.
Also, in light of the changing investment environment which definitely calls for new investing and trading strategies, there may be challenges here and there, particularly as the recent fuel subsidy removal and Naira devaluation come with fresh risk for the economy and some sectors in the short-term. Investors have to navigate the terrain to protect their portfolios and still make profits. We expect broad-based pressure to increase and reflect across the Consumer Price Index component, leading to 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 all these, and on the strength of changing fundamentals of the economy and government’s policy outlook, the second-half of this year remains mixed. As such, cautious optimism exists, regarding increased capital imports and foreign investment which may help reduce inflationary pressure. However, the next 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 have continued to reposition their portfolios, going for 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, more companies presented their Q3 earnings forecasts to guide investors, while others notified the Exchange of insiders’ dealings in their shares, especially Zenith Bank, Eterna, McNichole, Ucap, 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 Beta Glass, Airtel and Axa Mansard Insurance were adjusted for dividend of N1.17, N22.24 and 30 kobo respectively, just as portfolio rebalancing and mixed sentiments continue to reflect on market breadth for the period, as more stocks appreciated in value.
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 Q2 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 $73.48 per barrel in the midst of rate hike by Bank of England and fear of the Feds returning to a 25 basis points rates hike in July. 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
Again, the last full trading week of June witnessed a mixed performance of three trading sessions of up market and two days of negative outing due to profit booking in the midst of bull-run for the fifth consecutive week on high traded volume and positive market breadth.
The week’s trading started on a positive note, halting the previous losses as the NGX index gained a marginal 0.03%, which was sustained till midweek with the benchmark looking up by 0.12% and 0.36% respectively. This was followed by a 0.19% and 0.01% pullback on Thursday and Friday respectively, purely on profit taking, bringing the week’s total gain to 0.34%, compared to the previous week’s 5.49% positive position.
Consequently, the benchmark NGX All-Share Index gained 205.67bps, closing at 59,206.63bps from the previous week’s 59,000.96 points level. Within the period the index touched an intra-week high of 59,399.54bps, from its lows of 58,925.92bps. Similarly, market capitalisation rose by N111bn, also representing a 0.34% value gain at N32.24tr, from the previous week’s N32.13tr.
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, Q1 results 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 remain positive as gainers outpaced losers in the ratio of 62:35 on a mixed sentiment as revealed by investdata sentiment report showing 59% ‘buy’ volume and 41% sell position. Money Flow Index is looking up to read 58.76bps, from the previous week’s 52.90points, an indication that funds entered the market on a weekly chart to reflect position taking in blue chip stocks and some sectors of 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 to trade above 59,000 mark on mixed sentiment in the midst of profit taking and bearish divergence on daily chart, even as it trades 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 and sellers are fighting for dominance ahead of quarter end window dressing by fund managers and earnings reporting season around the corner.

Bullish Sectoral Indices
The sectorial performance indexes for the week closed green, led by the NGX Insurance which gained 3.22%, followed by Energy, Industrial, Consumer goods and Banking with 2.97%, 2.56%, 2.29% and 1.13% respectively.
Activities in terms of volume and value were down, as investors and traders exchanged 3.37bn shares worth N41.99bn, compared to the previous week’s 4.28bn units valued at N62.18bn, driven by financial services, Oil/Gas and Conglomerates stocks. Specifically, volume was boosted by trading in the shares of Universal Insurance, UBA, GTCO, Accesscorp and Transcorp.
Sahco and FTN Cocoa were best-performing stocks last week, after gaining 44.53% and 40.74% respectively, closing at N9.25 and N1.90 per share on market sentiment and forces. Investors could be reacting to the recent dividend payout and promise of an even juicier payout by the board of Sahco, as well as the emergence of a core investor in FTNCocoa which last week announced $12m investment in the cocoa industry value-chain (READ). On the flip side, the share prices of Jaiz Bank and Secure Electronic lost 18.97% and 17.39% respectively, at N1.41 and N0.38 per share, purely on profit taking and selloffs,

Outlook for the week
We expect positive sentiments to continue on end of quarter window dressing, expected nomination of ministers by the Federal Government, and the 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 57,578.12 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