Positive Sentiments Still On Improved Liquidity, Bargain Hunting, Amidst More Q1 Earnings Inflow

Market Update for April 26
Positive sentiment and momentum continued on the Nigerian Exchange at the midweek amidst the heightened buying activities among the low priced stocks, blue chip companies and large cap equities that pushed the benchmark NGX All-Share index above the 52,000 basis points psychological line to strengthen the consolidation and markup phase of the market.
The yields environment in the financial market remains mixed on the back of increasing liquidity and oscillating rates in the fixed income space, especially in the treasury bill market as the latest auction rate for 91 days and 364 tenor fell to 5.3% and 10.17% respectively ahead of the N735bn April bond maturity and more dividend payments, as more companies hold their yearly general meeting to approve payment to shareholders.
This is expected to support reinvestment in the market and push stock prices higher, as the majority of first quarter corporate earnings released to the market beat expectations, except for a few like Nigerian Breweries and Chemical & Allied Products that came below expectation, while reflecting the nation’s economic headwinds that resulted from the cash crunch in the first few months of the year.
Also, there is the prevailing low prices of many stocks in the market due to price adjustments that has made many companies attractive for new entry and repositioning of portfolios in the midst of high inflation and contracting economic activities as result of high cost of funds that are impacting negatively on the general economy.
The current markup phase of the market could be sustained on the strength of impressive Q1 earnings inflow, if the selling sentiment in highly priced stocks moderates, as the benchmark NGX index closed higher to extend its recovery for the fifth successive session. There has also been high traded volume and positive market breadth amidst strong momentum and buying interest in pending 2022 audited financials and Q1 2023 earnings reports.
Already, the market has rebounded from its oversold state as the All-Share index breakout the T line, ahead of it 20-Day simple moving average and EMA that support uptrend pattern for technical traders and discerning investors. This, however, requires confirmation before investors can jump into any position, especially as stocks have rebounded on the back of their prevailing undervalued state. Q1 numbers are likely to come predominantly mixed, due to the low economic activities during the period as a result of to cash crunch.
The prevailing dividend yields and low market price to earnings ratio provides better opportunities for discerning investors to hedge against inflation even when fixed income market yields look attractive. There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as a policy shift may be a plus for equities on a likely financial market and economic reset. Market volatility remains at the extreme on positive sentiment as T-line turned support for index action ahead of the next market forces.
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Oil price oscillation continued, as it slides further below $80 to trade at $77.62 per barrel on increasing fear of recession spreading in the midst of high booking of chinse ahead of May holiday. As fear of western central banks hiking rates in May, even when their economies are contracting in the face Ukraine attack and rising geopolitical tension across the globe, the prevailing high interest rate regime and soaring inflation, despite slowing down across the globe remain potent threat to world economy. Also, supply tightened due to the Russia-Ukraine war that entered the second year. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, midweek’s trading opened in the upside and was sustained for the rest of the session on increased buying interests among all classes of stocks, a situation that pushed the NGXASI to intraday high of 52,108.38 basis points from its lows of 51, 605.13ps, before closing sharply above its opening figure at 52,097.62bps.
Market technicals were positive and strong with higher volume traded, when compared to the previous session in the midst of breadth favoring the bulls on buying sentiment as revealed by Investdata’s Sentiments Report showing 98% buy position and 2% sell volume. The total transaction volume index stood at 3.52 points, just as energy behind the day’s performance was weak going by Money Flow Index at 40.53pts, from the previous day’s 32.79pts, indicating that funds entered the market.
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Index and Market Caps
At the end of the day’s trading, the NGXASI gained 491.13 basis points, closing at 52,097.62bps from its 51,606.49bps opening level, representing a 0.95% growth, just as market capitalization rose by N267.42bn to close at N28.37tr, from the previous day’s N28.10tr, which also represented a 0.95% appreciation in value.
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This upturn was driven by position taking in the shares of Airtel, MTNN, Lafarge, Total, Berger Paints, Transcorp, Cadbury, NNFM, Sterling Bank, NEM Insurance and Dangote Sugar among others, which impacted positively on Year-To-Date gain as it increased to 1.65%. Market capitalization YTD loss stood at N112 billion, representing 1.62% above its opening level for the year.

Mixed Sector Indices
Sectorial performance indexes were mixed, as the NGX Banking and Oil/Gas closed lover by 0.08% and 0.04% respectively, while NGX Insurance led the advancers after gaining 0.93%, followed by Consumer and Industrial goods with 0.61% and 0.16% respectively.
Market breadth was positive, as gainers outpaced losers in the ratio of 40:7, while activities in volume and value were up after players transacted 6.48 billion shares worth N19.47bn, with volume driven by trades in Transcorp, ALEX, Accesscorp, UBA and Fidelity Bank.
Livestock Feeds and Academy Press were the best performing stocks for the day after gaining 10% each, closing at N1.10 and N1.43per share respectively, on impressive Q1 numbers and expected unaudited Q4 numbers. On the flip side, Fidelity Bank and Fidson Healthcare lost 6.57% and 5.56% respectively, closing at N5.26 and N8.50per share, purely on profit taking.

Market Outlook
We expect the positive sentiments to continue on improving liquidity and bargain hunting, as more Q1 earnings hits the market in the midst of price adjustment and dividend payment. We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios post-dividend adjustments. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price rally to take profit. Also looking at the trends and events across the globe and domestically.

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