Positive Sentiments Yet, As Investors Eye Defensive Stocks, Await More Fiscal Measures

Market Update for June 20

The positive performance on the Nigerian Exchange continued Tuesday amid increased buying interest among market players, despite the seeming profit taking in some stocks. This impacted positively on the composite NGX All-Share index as it closed higher, thereby extending the bull transition for a second consecutive session on a low traded volume and positive market breadth.
Bargain hunters are taking advantage of some value stocks that are yet to move with the current trend, as investors pay kin attention to the ongoing government reforms expected to put the economy on the path of growth, support the stock market in the process and attract foreign investors. Also, the new government is following through its policy statement, even as the market awaits further guidelines, strategies and agenda to achieve all that were promised as part of the renewed hope agenda.
The NGX remains above the 59,000 mark, positive sentiment and buying interests during the session, with the index still at its 16-year market high on above average traded volume. In the process, many stocks are hitting new 52-week highs on strong buying sentiments and expected fall in interest rates as the government looks to reform monetary policy after the recent unification the foreign exchange rates.
Major sectors of the market witnessed buying interest on an increased inflow of funds as players took position in low, medium and high cap stocks, even as dividend yield of many companies become lower yet, ahead of the Q2 earnings reporting season. This is as more quoted companies notify the exchange and investing public of their closed periods and board meeting dates to approve the half-year financials. Also, all eyes are on audited financials of March year-end companies.
The market is currently trading above its 100-Day Simple Moving Average and 200DMA on the daily and weekly chart, while heading to the 60,442 basis points level again, with more stocks making new highs on the positive sentiment towards government economic and financial market reforms. This calls for a change in trading strategies and caution, amid the possibility of profit taking and correction. As such, technical traders and discerning investors must be guided, because higher prices will lead to lower dividend yields, even when the market’s Price to Earnings Ratio is relatively low. It however provides better opportunities for investors to hedge against inflation even when fixed income market yields look attractive and remain mixed in the face of high inflation.
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Oil price oscillation continued Monday, rebounding again to trade at $76.23per barrel in the midst of rate cut to stimulate economic activities in China and possibility improved geopolitics to support global economic recovery. Even as the Russia-Ukraine war remain a 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.
Trading started in the preen and was sustained for the rest the session, despite oscillating on accumulation of some stocks and profit taking, a situation that pushed the NGX All-Share Index to an intraday high of 59,125.75bps, from its lows of 59,012.15ps, before closing marginally above it opening figure at 59,110.02 point.
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 86% buy position and 14% sell volume. The total transaction volume index stood at 0.93 points, just as energy behind the day’s performance was strong, with Money Flow Index reads 83.18pts, from the previous day’s 83.90pts, indicating that funds entered the market was flat.
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Index and Market Caps
The benchmark NGX All-Share Index, at the end of Tuesday trading rose by a marginal 95,17bps, closing at 59,110.02bps, from its 59,016.72bps opening level, representing a 0.16% growth. Market capitalization gained N51.81bn to N32.19tr, from the previous day’s N32.13tr, which also represented a 0.16% value gain.
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Meanwhile, Tuesday’s upturn was driven by position taking in Seplat, GTCO, UBN, Dangote Cement, Lafarge, Eterna, Wapic, Mansard, Honeywell and FTN Cocoa, among others. This impacted positively on Year-To-Date gain, which increased to 15.31%, while Market Capitalization YTD gain went up to N4.40tr, representing 15.28% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed higher, led by NGX Insurance which gained 1.9%, followed by Energy, Industrial, Consumer goods and Banking with 1.4%, 0,10%, 0.06% and 0.02% respectively.
Market breadth was positive as gainers outpaced losers in the ratio of 50:19, while activities in volume and value were down after players exchanged 588.85m shares worth N8.96bn, driven by trades in, UBA, GTCO, Transcorp, Accesscorp and Veritas Assurance.
Skyway Aviation and Academy Press were the best performing stocks, gaining 10% each, closing at N7.70 and N1.98 per share respectively on positive market forces and sentiment. On the flip side, C & I Leasing and Cornerstone Insurance lost 10% and 9.8% respectively, closing at N4.05 and N1.01per share, purely on profit taking.

Market Outlook
We expect positive sentiments to continue, regardless of profit taking, as players target defensive stocks on improved investors sentiments to realign their portfolios, just as more policy pronouncements and appointments to give direction. Also, Q2 earnings reporting season draws closer to confirm the real state of the company performance and attract liquidity in the midst of markdown dates and expected March year end audited accounts.
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. Also looking at the trends and events across the globe and domestically.

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