Market Update for March 17
The bear and bull battle for dominance continued on the Nigerian Stock Exchange at the midweek, with the composite All-Share index closing on a slightly negative note, resisting further decline while sideways trending in the midst of earnings reporting season. This coincides with the fall in oil price ahead of next week’s all-important meeting of the Central Bank of Nigeria Monetary Policy Committee.
With the market turning up technically as revealed by indicators, traders should wait to confirm this new trend on Thursday and Friday, as the ongoing selloffs present huge buying opportunities for bargain hunters and discerning investors to create wealth.
The seeming early economic expansion, following which the economy has exited recession, as seen in the recovery in productivity that has been confirmed by February’s Purchasing Managers’ index of 52.7 points, up from 50.7 points in January, will be threatened, should members of the MPC vote to raise rates, pressured by the galloping inflation.
Nonetheless, the early stage of recovery and current happenings in the environment offer big opportunities as some sectors and companies continue to benefit from the COVID vaccination driven global and domestic recovery which in turn will support oil price despite the oscillation being witnessed at the moment. Investors and traders must, therefore, target the right sectors and stocks for higher capital gains and yields to outperform inflation in the short-term, following which reason the equity market remains the right investment hedge vehicle, not minding the rising yields in the fixed income market.
The Nigerian equity market is currently trading below the 39,000 basis points support level, a sign of volatility towards the next one that has been sported around 38,464.00bps. Should the index break this point, the next visible support is far below at 34,396.3bps, unless there is positive news, or favourable policies capable of knee-jerking the market, while boosting liquidity and sentiments.
Meanwhile, midweek’s trading opened slightly on the downside and oscillated on buying interests in high, medium and dividend-paying stocks, as well as selloffs in financial stocks. These pushed the benchmark index to an intraday low of 38,643.06 basis points from its highs of 38,720.81bps before closing marginally below its opening point at 38,706.13bps on a low traded volume.
Wednesday’s market technicals were weak and mixed, with volume traded lower than previous day’s in the midst of almost a flat breadth and high buying sentiment as revealed by Investdata’s Sentiments Report showing 81% ‘buy’ volume and 19% ‘sell’ position. Total transaction volume index stood at 0.46 points, just as energy behind the day’s performance remained weak, with Money Flow Index looking up slightly at 22.46pts, from the previous day’s 21.71pts, indicating that funds entered the market, despite the market sliding down.
Index and Market Caps
At the end of Wednesday’s trading, the All Share index shed a marginal 14.68bps, closing at 38,706.13bps after opening at 38,720.81bps, representing a 0.04% drop. Similarly, market capitalization lost N7.18bn, closing at N20.25 trillion, from previous day’s N20.26 trillion, which also represented 0.04% value loss.
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Midweek’s downturn resulted from selloffs in stocks like Guaranty Trust Bank, FBNH, Fidelity Bank, and FCMB, among others. This impacted mildly on Year-To-Date loss, raising it to 3.89%, just as market capitalization loss ballooned to N832.19bn, or 3.64% below its opening value for the year.
BearishSector Indices
Performance indexes across sectors were bearish, as only the NSE Oil/Gas index closed 1.27% positive, while the NSE Insurance index led the decliners, losing 1.03%, followed by Banking and Consumer goods with 0.42% and 0.02% respectively lower.
Market breadth was negative, as decliners outnumbered advancers in the ratio of 13:12; just as transaction in volume and value terms dropped as stockbrokers traded 177.4m shares worth N2.68bn. The day’s volume was driven by transactions in Guaranty Trust Bank, Zenith Bank, UBA, Transcorp and Access Bank.
Coronation Insurance and Oando were the best performing stocks, gaining 10% and 9.67% respectively, after closing at N0.55 and N3.29 per share respectively on earnings expectations and market forces. On the flip side, NCR and Neimenth Pharmaceutical lost 9.71% and 9.09% respectively, closing at N2.79 and N1.90 per share, on profit taking.
Market Outlook
We expect the mixed trend to continue as more corporate earnings hit the market in the face of rising fixed income market yields, oil prices and high dividend yields during this earnings season. Also, the pullbacks offer bargain hunters and income investors another opportunity to reposition, while more companies release their full-year numbers to support recovery. This is based on the fact that the rising fixed income yields may not be enough to scare all investors away from the equity market.
Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities. This is especially given the rising oil prices that have so far supported the economy and equity market, despite the seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by expected 2020 full earnings reports, until the next MPC meeting in March.
The NSE’s index action and indicators are in divergence on a low traded volume and positive buying sentiments.
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