Trends May Linger Amid Profit Taking, Buying Interest, Reactions To Earnings Inflow

Market Update for May 8
The second full trading week on the Nigerian Exchange opened positive on Monday, with the Nigerian Exchange’s benchmark All-Share index closed higher on a low traded volume and positive market breadth that continued its bullish transition for a third consecutive session. This was expected, as investors reacted positively to the outpouring of Q1 corporate earnings, and notwithstanding the mixed macroeconomic data and the expected impact of the pro-market disposition of the incoming government expected to boost confidence and support the ongoing recovery.
We expect an increase in volume and crossed deals in the market that reflect the presence of smart money to support the positive sentiment and recovery in the equity space, just as buying sentiments in the financial services stocks, blue chip companies and large cap equities on the strength of their impressive Q1 numbers. Market players at the current phase of the market are looking at fundamentally sound stocks and the future growth prospect considering their sectors and current prices. The prevailing low prices of many stocks due to price adjustments for dividend has made them attractive for new entry and repositioning of portfolios in the midst of high inflation and improving economic activities, despite the high cost of funds.
The positive momentum on the exchange was strengthened on Monday, amid demands for banking stocks and other blue chip companies, a situation that pushed the benchmark All-Share index higher, trading above the T line and the 20-Day simple moving average, heading to 50 EMA which stand as resistance level on a daily chart. This should guide technical traders and discerning investors. Looking at dividend yields and low market price to earnings ratio that provides better opportunities for investors to hedge against inflation even when fixed income market yields look attractive and remain mixed.
Also, there is the uncertainty of a rate crash by the incoming government as it moves to drive economic growth and development, even as we note the suspension of plans to remove fuel subsidy and postpone the population census, signaling the possibility of a policy shift. These may be a plus for the equity market 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 and positive statement.
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Oil price oscillation continued, edging lower to $76.57 per barrel in the midst of an increasing fear of recession and weak trade data from China, just as central banks rates hike is driving economic contraction in the face Ukraine attack. This is in addition to 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.
Monday’s trading started on the upside and oscillated throughout the session on buying interests and profit taking in some stocks, a situation that pushed the NGXASI to an intraday high of 52,622.37 basis points from its lows of 52,465.33ps, before closing above its opening figure at 52,579.52bps.
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 a buying sentiment as revealed by Investdata’s Sentiments Report showing 73% buy position and 27% sell volume. The total transaction volume index stood at 0.96 points, just as momentum behind the day’s performance was strong as Money Flow Index reads 74.09pts, from the previous day’s 73.52pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Monday trading, the benchmark NGX All Share Index gained 114.21 basis points to close at 52,579.52bps from its 52,465.31bps opening level, representing a 0.22% up, just as market capitalization rose by N62.10bn to close at N28.63tr, from the previous day’s N28.57tr, which also represented a 0.22% value gain.
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Meanwhile, Monday’s upturn was driven by position taking in the shares of NB, Ardova, International Breweries, Redstar Express, Honeywell and Accesscorp among others, which impacted mildly on Year-To-Date gain as it increased to 2.59%. Market capitalization YTD gain rose to N340.17bn, representing 2.56% above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes were in green, led by NGX Insurance which gained 0.80%, followed by Banking, Consumer goods, Energy and Industrial goods with 0.62%, 0.56%, 0.35% and 0.03% respectively.
Market breadth was positive as gainers outpaced losers in the ratio of 28:17, while transactions in volume and value were high after investors exchange 511.38 million shares worth N7.14bn, with volume driven by trades in Accesscorp, FBNH, UBA, Transcorp and Mansard Insurance.
Multiverse and Redstar Express were the best performing stocks for the day, gaining 10% and 9.96% respectively, to close at N3.41 and N2.65 per share, on market sentiment and earnings expectation. On the flip side, C & I Leasing and Transcorp lost 9.80% and 7.73% respectively, closing at N3.59 and N1.79per share, purely on profit taking.

Market Outlook
We expect the sentiments to continue on profit taking and payments for dividend to support buying interest, just as investors react to corporate earnings ahead of markdown dates, April Consumer Price Index, MPC meeting and dividend payments.
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