Expect Bullish Sentiments This Week, On More audited Earnings, Dividend News

Market Update for the Week Ended February 25 and Outlook for Feb 28-Mar 4

The nation’s equity prices closed higher in the midst of continued volatility and rising crude oil prices arising from the geopolitical tension in Eastern Europe that has rattled the global financial markets. These halted two consecutive weeks of negative outings and side-trending on renewed buying interests in blue-chips and positive reactions to the impressive dividend payouts by directors of United capital, and others like MTNN and Nigerian Breweries, which has helped to sustain the current market tempo.

The seeming calmness and sideways movement of the NGX All Share index over the past three weeks are signs that the market is still awaiting a trigger in form of more corporate actions since the market has broken out the recent resistance level of 47,335.72 to test 47,378.34 points on a very high traded volume. Also, we note that the NGX index action refused to break down its 47,000 mark, ahead of more 2021 full-year audited financials and the expected dividend announcement, which is likely to stimulate demand for stocks.

As a trader or investor, it is important you know how to benefit from the current market trend and situation, considering the earnings season, and the rallying oil prices in the international market. It is obvious that market dynamics and trends are changing from what we have experienced over the past years, especially with the post-pandemic shift.  A portfolio comprising 50/50 stock and bond is costing you money now as the market continues moving sideways in the midst of volatility and corporate earnings expectation, which is likely to trigger a big rally depending on the final payout of listed companies on the exchange.   

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With the bull resurfacing during the week, the share prices of United Capital, Academy Press, Niger Insurance, RT Briscoe, SCOA, May & Baker, among others hit new 52-week highs.

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Movement Of NGXASI

It was a bullish week of side-trending, as the NGX index action attempted to break out the recent resistance on a high traded volume, after recording four sessions of upmarket and a day of a down market, thereby short-living two successive weeks of bear transition on position-taking.

Trading opened the week on a positive note, gaining 0.08%, an extension of the previous Friday’s buying interest which persisted until Tuesday when the index inched up 0.09%. The trend was halted at the midweek when the market lost 0.08% on profit-taking in medium cap and blue-chips but rebounded on Thursday and Friday after gaining 0.14% and 0.16% respectively on the accumulation of position. This brought the week’s total gain to 0.40%, compared to the previous week’s negative position of 0.13%.

Consequently, the key performance index gained 187.94 basis points, closing the week at 47,328.42bps, after touching an intra-week high of 47,328.34 points, from its lows of 47,139.80bps. Recall that the week started with the index at 47,140.48bps. During the week also, market capitalisation rose by N101bn, closing at N25.50tr, compared to the previous week’s N25.41tr, which also represented a 0.40% appreciation in value. 

As usual, the week’s top gainers table was dominated by low and medium cap stocks, owing to the continued demand for dividend-paying stocks, as players took advantage of the correction to buy into the better-than-expected numbers hit the market. There were also the impacts of sectorial fundamental news as the oil sector became the toast for investors as oil prices remained upbeat.  

We note that the NGX Index and price actions reveal positive sentiments, a situation that was reflected in major sectoral indexes that closed positive, due to capital gain recorded by Zenith Bank, GTCO, Seplat, Ucap, and others that pushed the index higher.

Market breadth for the week remained positive on a high traded volume due to position-taking, with the onset of corporate actions, leaving investors pleasantly surprised, even as the released numbers have so far given insights into what is expected in terms of dividends. This is likely to support the recovery in the short to long run, while investors increase their positions in the hope of higher dividend payouts and yields, as revealed by numbers and payout announced by directors of United Capital, just as fixed income market returns remain negative, despite the recently announced improvement in the inflation rate.

During the week, advancers outnumbered decliners in the ratio of 44:22, on buying sentiments, as revealed by the investor sentiment report showing a 79% ‘buy’ volume and 21% sell position. Money Flow Index inched up at 68.24bps from the previous week’s 67.60 points, an indication that funds enter the market.  

NGX’s positive sentiment and rekindled buying interests for the period under review, supported a strong and bullish signal on the weekly chart, while momentum indicators were positive and mixed, on a very high traded volume, as the NGXASI still trades above the 47,000 points to test 47,3378.34 basis points. The candlestick formation, at the end of the week, revealed buyers are in charge at a time the release of more 2021 audited financials continues to give direction. The candlestick pattern indicates a possible reversal or continuation of the 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.

Mixed Sectoral Indices

The sectorial performance indexes for the week were mixed, as the NGX Oil/Gas, Insurance, and Banking closed higher by 3.89%, 0.73%, and 0.21% respectively, while the NGX Consumer Goods led the decliners after losing 1.06%, followed by Industrial goods with 0.01%.  

Activities in volume and value terms were down as players traded 1.67bn shares worth N19.48bn, compared to the previous week’s 1.71bn units valued at N30.760bn. This volume was driven by Financial Services, Conglomerates and Consumer goods stocks, Transcorp, United Capital, Zenith Bank, Access Bank, and Fidelity Bank.

RT Briscoe and Niger Insurance were the best-performing stocks for the week, gaining 53.85% and 46.67% respectively, closing at N0.94 and N0.28per share respectively on market sentiment and forces. On the flip side, Ellah Lakes and Juli Pharma lost 9.88% and 9.76% respectively, at N3.83 and N0.74 per share, purely on selloffs.

Outlook for the week

We expect positive and bullish sentiments to continue in the new week, as more dividend announcements and 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 Zenith Bank, Lafarge Africa, 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 better investment yields or returns. 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; corporate actions, as well as the 2021 audited numbers that are around the corner.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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