Bullish Sentiment Ahead On More 2021 Audited Earnings Inflow, Investor Reactions

Market Update for the Week Ended February 11 and Outlook for Feb 14-18

After six successive weeks of NGX rally and positive buying sentiment, the market suffered a slowdown last week on a volatile move associated with the earnings reporting season, amid profit-taking in large-cap stocks that dragged the benchmark All-Share index lower in the midst of a positive market breadth during the period. There was also low traded volume that reflected the wait-and-see attitude for expected corporate actions of December year-end accounts.

Despite the high cap selloffs induced down market, investors buying interest and position-taking across sectors and dividend-paying stocks continued ahead of the release of more audited 2021 full-year earnings reports and dividend declarations. These are expected to add more momentum and vibes as the market remains strong on the weekly chart, despite the seeming divergence between the index action and indicators on the daily time frame.   

The healthy and strong earnings released so far, while the market remains expectant of the early filers with corporate actions and the consumer price index for January to hit the market this week are keeping investors upbeat. Also, many financial services providers, especially the first-tier banks say they have sent their financials to the Central Bank of Nigeria (CBN) for approval before making them available to the investing public.

When the market becomes very volatile as we are witnessing lately, we need to focus more on price, or index actions to make sense of the situation, and enable us take advantage of what is happening in the market. The objective here, is that you become more practical and remove emotions to identify profitable trades based on patterns that tend to repeat themselves by analyzing changes in trends and price structures to know the next move. 

During the week, the share prices of Guinness Nigeria, Academy Press, Total Energies, and Access Bank, among others hit their new 52-week high.

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Movement Of NGXASI

The NGX’s index action had a mixed trend and performance, closing negatively and thereby halting six weeks of positive outings that started in the last week of 2021, on the back of quarter and year-end window dressing. This was also supported by other factors like the rallying oil price, unchanged MPR at the end of first MPC meeting in 2022, the inflow of impressive corporate earnings, listing of BUA Foods, and price appreciation by large cap stocks.

The week started on a negative note, losing 0.21%, an extension of the previous Friday’s trading session which persisted until Tuesday when the index lost 0.31%. This downtrend was halted at the midweek when the market gained recovered 0.21% on rekindled buying interests in medium cap and blue-chips stocks, which was extended with a further 0.30% gain on Thursday, due to position taking in Total Energies, Guinness, NGX GROUP and others. The benchmark index’s 0.18% pullback on Friday brought the week’s total loss to 0.16%, against the previous week’s 2.33% gain.

Consequently, the key performance index shed 77.62 basis points, closing the week at 47,202.30bps, after touching an intra-week low of 47,037.24 points, from its high of 47,324.09bps. Recall that the week opened with the index at 47,279.92bps. During the week also, market capitalisation fell by N45.28bn, closing at N25.44tr, compared to the previous week’s N25.48tr, which also represented a 0.16% depreciation in value.  

The week’s gainers’ chart as usual, was dominated by low and medium cap stocks, owing to the continued demand for dividend paying stocks, as players took advantage of the pullbacks in the better-than-expected numbers hitting the market. There are also the impacts of sectorial fundamental news and positive economic data, ahead of the January inflation data.

We note that the NGX Index and price actions reveal mixed sentiment, a situation that is not reflected in major sectoral indexes that closed higher, despite the losses recorded by MTN Nigeria, Seplat, BUA Foods, Stanbic IBTC, GTCO, NB and other that pulled the index down.

Market breadth for the week remained positive on a low traded volume as a result of profit taking and the wait-and-see attitude for the corporate actions among investors, since the released numbers have so far given an insight into what is expected in terms of dividend. This is likely to support the recovery in the short to long-run, while investors increase their positions in the hope of higher dividend payout and yields, just as fixed income market returns remain negative, following the recent uptick in inflation.

During the week, advancers outnumbered decliners in the ratio of 44:31, on mixed sentiments, as revealed by the investor vibes report showing a 58% buy volume and 42% sell position. Money Flow Index inched up at 75.30bps from the previous week’s 75.23 points, an indication that funds entered the market marginally.  

The NGX’s positive sentiment persisted in the period under review, as index action on a weekly time frame remained strong and bullish, while momentum indicators were positive, irrespective of the low traded volume, even as the NGXASI still trades above the 47,000 points. The candlestick formation, at the end of the week, revealed indecision as the market resists decline at a time the release of more 2021 audited financials continue to give direction. The candlestick pattern indicates a possible reversal or continuation of trend, depending on market forces in the new week. Meanwhile, market recovery is still strong. Also, all eyes are on fixed income market yields and oil prices to further support market fundamentals and attract liquidity to the equity space. The NGX at this point is creating new buying opportunities for dividend income investors.

Bullish Sectoral Indices

All Sectorial index for the week were in the green, led by the NGX Banking with 2.34%, followed by Insurance with 1.51%, and Consumer Goods, Energy and Industrial goods with 1.35%, 0.29% and 0.06% respectively.

Activities in volume and value terms were mixed as investors exchanged 1.33bn shares worth N22.70bn, compared to previous week’s 1.79bn units valued at N19.61bn. This volume was driven by Financial Services, Consumer goods and Conglomerates stocks, particularly Access Bank, GTCO, Fidelity Bank, Transcorp and Chams,

SCOA Nigeria Plc and RT Briscoe were the best performing stocks for the week, gaining 42.40% and 39.29% respectively, closing at N1.78 and N0.39 per share respectively on market sentiment and forces. On the flip side, Pharma Deko and Okomu Oil lost 16.67% and 10% respectively, at N1.65 and N127.80 per share, purely on selloffs and profit taking.

Outlook for the week

We expect positive and bullish sentiment in the new week, as more 2021 audited earnings reports hit the market, in the midst of the positive momentum and profit booking, as investors and traders react to numbers and expected dividend declaration. We note that income investors continue buying into dividend-paying stocks, ahead of February early filers like United Capital, NB, Zenith Bank, Africa Prudential, Nestle, Access Bank, Dangote Cement.

On the strength of the impressive numbers seen so far and the expected payout ratio, funds are likely to flow towards the better investment yield or return. We note also that funds and portfolio managers continue to take position on the strength of the Q4 numbers released, ahead of the 2021 audited financials. For now, many stocks remain within their buy ranges to attract funds into the equity space.

Also, investors will continue tracking yields movement in the fixed income market. Last week’s high volume suggests that institutional investors are gradually returning to the market. It is important also that oil price continues to rally in the international market, trading above $91 per barrel; corporate actions, as well as the 2021 audited numbers that are around the corner.

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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605