Market Update for July 20

The seesaw movement on the Nigerian Exchange returned Thursday, as market players increased their buying interests across low, medium and large cap stocks, pushing the benchmark All-Share index higher, and thereby wiping out the previous session’s loss. Transaction volume was above average in the midst of buying sentiment, positive market breadth and bearish divergence as revealed by the MACD.
Portfolios reshuffling and realigning continued in the face of changing economic fundamentals, concerns and hope of more corporate earnings reports even while all eyes on high profile companies to release their half-year scorecards. Stakeholders are also betting on the possible outcome of next week’s meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee.
During the session, The Initiative Plc released its half-year earnings reports which was mixed, with top line rising by 14.31%, while profit fell by 20% to reflect the prevailing economic condition and the operating environment. This translated to 0.07 kobo earnings per share from 0.08 kobo posted in 2022. Also on Thursday, FBN Holdings, parent company of first-tier 129 year-old First Bank of Nigeria Limited made available its six-month earnings report after the market had closed, with impressive numbers that beat investors’ expectation. Gross earnings stood at N656.55bn, from N359.15bn in 2022, representing a growth of 83%, while net income for the period grew by 231% to N187.24bn, up from N56.6bn in 2022. This also produced earnings per share of N5.10 which gives investors an insight into what to expect from the banking sector which remains a net gainer from the government ongoing economic reforms, among others.
Despite the bearish divergence from the momentum indicator, more funds are flowing into the equity space as a signal that the bulls are underway as high profile companies on the exchange release impressive numbers. We need to confirm this when the market opens Friday, as the benchmark index’s inched up on a strong buying pattern and high traded volume. That is expected to support a continuation of trend, or pullback.
The inflow of more half year earnings reports is expected to drive increased volatility, especially rotation and portfolio reshuffling in value-oriented sectors. This is against the backdrop of an environment where reform policies are driving hyperinflationary pressure in the face of an already heated economy and headwinds ranging from rising inflation, high interest rate regime and insecurity, among others.
The NGX closed higher on Thursday to indicate a markup phase on buying sentiment, in the midst of profit taking in some banking, industrial goods and others stocks. Investors should know that profit taking is part of market dynamics. This is why despite the changing market structure as a result of gradual return of foreign portfolio investors and trading environment, we look forward to a mixed outing and intermittent profit taking, since factors that pushed the market to this level remain unchanged so far.
We also note that the earnings reporting season will reveal the state of corporate earnings power and others, which would expectedly be the game changer as we go into the quarter. Already, all eyes are on the expected appointment of economic managers and minsters by this new government, a situation that will determine their rating of the new administration.
The major sectors of the market witnessed a bullish performance on increased position taking and buying interests among low, medium and high cap stocks, especially in the telecoms, insurance, consumer goods, energy and others. This was as more quoted companies notified the exchange and investors of insider dealings, their closed periods and board meeting dates to approve the half-year financials.
The NGX index’s action still trades above the T-line, 50-Day Simple Moving Average and 100DMA on the daily and weekly chart in the midst of government economic and financial market reforms. This calls for a change in trading strategies and buying into value companies, amid the possibility of profit taking and correction any time. As such, technical traders and discerning investors must be guided, because higher prices will lead to lower dividend yields, even when market 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, trading at $80.38.per barrel in the midst of fundamentals countering economic concerns and unclear rate direction of fed, as inflation rate gradually slowdown across many economies. 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.
Thursday’s trading opened slightly in the upside which was sustained for the rest of the session on buying interests in blue chip stocks and others that pushed the Index to an intraday high of 63,930.72bps, from its lows of 63,745.52bps, before closing slightly above it opening points at 63,930.72bps.
Market technicals were positive and strong with a higher volume traded when compared to the previous session in the midst of breadth favoring the bulls on a buying pressure as revealed by Investdata Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 1.35 points, just as energy behind the day’s performance was strong, with Money Flow Index reads 80.11pts, from the previous day’s 79.65pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Thursday, the key performance NGX All-Share Index gained 173.47 basis points, closing at 63,930.72bps, from its 63,757.23bps opening level, representing a 0.27% rise. Market capitalization also rose by N94.5bn to N34.81tr, from the previous day’s N34.72tr, which also represented a 0.27% appreciation in value.
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Meanwhile, the upturn was driven by position taking in shares of Geregu, UBA, Zenith Bank, Dangote Sugar, PZ, Eterna and Wapco among others. This impacted mildly on Year-To-Date growth, flat it to 24.7%, while Market Capitalization YTD gain increased to N7.10tr, representing 24.3% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes were up, as NGX Insurance led the advancers after gaining 1.2%, followed by Banking, Energy, Consumer and Industrial goods with 0.6%,0.4%, 0.03% and 0.01% respectively.
Market breadth turned positive as gainers outnumbered losers in the ratio of 42:21, while transactions in volume and value were up after investors exchanged 1.4b shares worth N18.1bn, driven by trades in UBA, SterlingNG, FBNH, Japaul Gold and Universal Insurance.
University Press and Eunsell were the best performing stocks, gaining 10% each, closing at N2.42 and N3.20 per share respectively, on positive market forces and sentiment. On the flip side, Courtville Business Solution and FTNCocoa lost 9.9% and 9.7%, closing at N0.64 and N1.87per share, purely on profit taking and selloffs.

Market Outlook
We expect mixed sentiments to continue as market reacts to FBNH earnings reports and bargain hunting in the midst of profit taking, economic concerns and portfolio repositioning amidst supportive reforms of the government, just as more policy pronouncements and appointments would offer investment direction. Also, as more Q2 earnings reports are expected to confirm the real state of the company performance and attract liquidity in the midst of markdown dates and the release of remaining 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
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08179547605