Positive Sentiments May Linger On NGX, Amidst Financial Market Reforms, Profit Taking, Realignments

Market Update for the Week Ended June 16 and Outlook for June 19-23

The Nigerian bourse witnessed a mixed trend and performance last week, extending the positive outing for the fourth consecutive week on increasing buying interests across major sectors of the market. This resulted from market players reacting to the ongoing economic reforms of government on the back of more policy pronouncement, guidelines, implementation and political appointments expected to give clear direction.
The changing market environment and economic fundamentals calls for players- investor and traders alike, to change strategies, while approaching the market, especially with the unification of foreign exchange rate which makes the Nigerian stocks cheaper, amid the high volatility due to the inflow from the foreign portfolio investors. The increasing positioning by local investors and insiders have reflected on the high traded volume and volatility that supports market recovery, despite the seeming profit taking which is part of the market dynamics.
With the fundamental news of the recent shake-up in the administration of the Central Bank of Nigeria (CBN), reforms in the financial sector, especially the unification of exchange rates, as well as the latest news of a raise in the daily withdraw limit of $10k from domiciliary accounts expected to boost trading. Also, in addition to the headline inflation data for the month of May in Nigeria, which surged to 22.41% from 22.22% in April, as food inflation continued its upward sail, reaching 24.82% in May. The core sub-index, excluding food and energy prices, witnessed a marginal decline. The recent fuel subsidy removal and increase in pump price of fuel are expected to reflect in the numbers for June and the coming months. As such, cautious optimism exists regarding increased capital imports and foreign investment which may help in reducing inflation. However, outlook on interest rate remain mixed ahead of next MPC meeting.
Also, on the strength of changing fundamentals of the economy and government policy outlook, the month of June and second half year remains mixed. But in the midst of these, discerning investors and traders continue to reposition their portfolios, going for defensive stocks to protect their trades, as sectorial rotation persists in a policy changing environment. Investdata expects mixed trading and position taking in the days ahead, especially before the 2023 Q2 earnings reporting season.
During the week, more companies presented their Q3 earnings forecasts to guide investors, while more companies notified the Exchange of insiders’ dealings in their shares, especially from Living Trust Mortgage Bank, Accesscorp, Africa Prudent, Eterna, Ucap, and GTCO among others. This situation suggests these board members and top management staff are seeing inherent value in their companies, hence their repositioning therein. This should guide investors and traders as they watch the market and take investment decisions.
RT Briscoe and Universal Insurance presented their belated full year 2022 financials to the market and the numbers are looking up, but no dividend were recommended, while the share prices of Trans-Nationwide Express was adjusted for dividend of two kobo. Portfolio rebalancing and positive sentiment continue to reflect on the market breadth for the period, as more share prices appreciated in value during the period. 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 the rest of Q2 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, as it rebound to trade at $76.61 per barrel in the midst of rate pause by Fed and seeming improving global macroeconomic data. 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
It was a short trading week of mixed performance after Monday’s public holiday to commemorate the nation’s Democracy Day. The NGX index was up in two trading sessions and down in two days, thereby sustaining its weekly gains for four straight weeks in the midst of bullish outing and profit taking on a very high traded volume and positive market breadth.
Trading opened for the week on a positive note, halting the previous losses as the benchmark index gained 3.99%, on positive reaction to the suspension of the CBN chief, this trend was sustained at the midweek when the index notched 2.99% to cross the psychological line of 60,000 basis points, before pulling back on Thursday by 1.33% loss after testing 60,442.12bps on profit taking. This was sustained on the last trading day of the week, as the index slide further by 0.33%, bringing the week’s total gain to 5.49%, compared to the previous week’s 0.20% positive position.
Consequently, the benchmark NGX All-Share Index gained 3,069.99bps, closing at 59,000.96bps from the previous week’s 55,930.97 points level. Within the period the index touched an intra-week high of 60,442.12bps, from its lows of 55,830.97bps. Similarly, market capitalisation rose by N1.67tr, also representing a 5.49% value gain at N32.13tr, from the previous week’s N30.46tr.
Top gainers’ table for the week was dominated by low and medium cap stocks, amidst buying interests and profit taking, just as volatility and portfolio repositioning continued. Also notable was the increased buying interest in service providing companies and others based on market sentiment and new government policies impacting positively on their bottom lines, just as Q1 results from different sectors reveals inherent value in some companies with strong volume patterns. So, buying into value, strong earnings and high dividend yield companies remain the way to go, despite the new prices impacting negatively on yields.
Market breadth for the week was positive as gainers outpaced losers in the ratio of 77:24 on a buying sentiment as revealed by investdata sentiment report showing 68% ‘buy’ volume and 32% sell position. Money Flow Index is looking up to read 52.90bps, from the previous week’s 47.50points, 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 has broken out the strong resistance level of 56,000 to test 60,442.12 on increased buying sentiment in the midst of profit booking to trade above the 100 DMA and 200 DMA on a high traded volume to rally 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 are still in charge due to expectations ahead of another earnings reporting season around the corner.

Bullish Sectoral Indices
The sectorial performance indexes for the week were bullish, except for the NGX Industrial Goods that closed 1.63% lower, while the NGX Banking led the advancers after gaining 12.59%, followed by Energy, Insurance and Consumer goods with 11.95%, 9.00% and 4.14% respectively.
Transactions in volume and value terms rose sharply up, as market players exchanged 4.28bn shares worth N62.18bn, compared to the previous week’s 2.20bn units valued at N45.97bn. Volume was driven by financial services, Energy and Consumer Goods stocks, boosted by trading UBA, GTCO, Accesscorp, Living Trust Mortgage Bank and Transcorp.
FTN Cocoa and Unity Bank were best-performing stocks for the week, after gaining 45.16% and 41.67% respectively, closing at N1.35 and N1.02 per share on market sentiment and forces. On the flip side, The Initiates Plc and John Holt had lost 25% and 17.85% respectively, at N0.39 and N1.15 per share, purely on profit taking and selloffs,

Outlook for the week
We expect positive sentiments to continue as market players react to economic and financial market reforms, despite intermittent profit taking and portfolio realignment ahead of march year end audited financials in the midst of expected policy guideline and implementation, as corporate actions provide 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
Tel: 08028164085, 08179547605