Expect Continued Positive Trend, Amid Month-end Portfolio Balancing, On Q1 Earnings Influx

Market Update for April 28

The bull-run and positive sentiments on the Nigerian Exchange were strengthened on Thursday as it continued for the 13th successive session on yet another very high traded volume and positive market breadth, helped by the further outpouring of impressive Q1 corporate earnings to the market ahead of the statutory deadline for submission of 2022Q1 results.

The improved buying interests across the major sectors continued at the close of trading, as investors keenly observe the nation’s economic development, in the face of marginal uptick in the long tenor Central Bank of Nigeria’s Treasury bill at the end of the week primary market auction.  Will this influence flow of funds out of equity space with the rising inflation? Just as stakeholders are, however, anxiously awaiting the plans by the CBN to intervene in the petrol products sector, which as announced is targeted at making premium motor spirit and diesel available, thereby easing the pain of manufacturers, SMEs and households across the country, in the face of the epileptic power supply.

There were positive and buying sentiments at Thursday’s session, in the face of the huge volume traded, as traders and investors accumulate more blue-chip stocks on the strength of earnings emanating from these companies. Tentatively, the continued mixed direction of fixed income market yields and the rates of Treasury Bills may slow down the flow of funds therein, but the strong demand for stocks in this prevailing uptrend and positive sentiment amidst the ongoing war in Ukraine has influenced the market in recent times.

Oil price rebounded to trade above $108 per barrel at the international market, despite the demand crisis in China as a result of lockdown in some provinces, just as crude oil prices are pushing production costs up, heightening inflationary pressure across the globe and weak economic outlook. This is influencing the monetary policies of central banks as they move to checkmate the impacts of the Russia-Ukraine conflict on the global economy to avoid global recession. The uptick in domestic inflation is a potent threat to the fixed income market and investment yields, which should be an indication that funds may likely flow into the equity space as institutional investors balance their portfolios ahead of the new month in expectation of portfolio reshuffling as market digest Q1 2022 corporate earnings and economic data.  

The renewed strong momentum, buying interests, and increased liquidity at the peak of the earnings reporting season have created ‘buy’ signals for smart and discerning traders as smart money makes efforts to push up the prices of equity. However, we warn that market corrections are underway as a result of profit-taking, hence the need to rely on your stop-loss effectively, as oscillating trend signals that a major uptrend is underway, especially when the high cap stocks that control 70% of market capitalisation move up ahead of market reaction to their earnings and expected dividend in May and June 2022.   

Thursday’s candlestick formation at the close of trading revealed that buyers are in charge, which may likely be a continuation of trends, or reversal, depending on market forces as trading opens today. The NGX index’s action sustained its uptrend to breakout 48,700.20 basis points and remain in the markup phase, trading above the T-Line and 20-day moving average. The market remains strong and is heading to 49,000bps region which is the strong resistance level, as volatility persists and uptrends towards the next breakout is sported around 48,958.18bps. Should the index break this point, the next visible resistance is 49,058.72 points.

Technically, the NGX index action has broken out on impressive earnings and strong demand for stocks. The possibility of the market sustaining this trend is high as a function of stronger corporate earnings and improved economic conditions during this season, following which we advise investors to play defensive stocks to reduce investment risks around the market.

Meanwhile, Thursday’s trading started on the upside and was sustained throughout the session on buying interests in blue-chips companies, a situation that pushed the NGX’s index to an intraday high of 48,853.68bpsfrom its lows of 48,571.75bps, before closing above its opening point at 48,837.76bps.

Market technicals were positive and strong as volume traded was higher than the previous day’s in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 94% ‘buy’ volume and 6% ‘sell’ position. The total transaction volume index stood at 2.55 points, just as momentum behind the day’s performance remained strong with Money Flow Index looking up at 86.57pts, from the previous day’s 84.93pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Thursday’s trading, the key performance NGXASI gained 266.01bps to close at 48,837.76bps, after opening at 48,571.75bps, representing a 0.55% growth. Similarly, market capitalization rose by N143.41bn, closing at N26.33tr, from the previous day’s N26.18tr, which also represented a 0.55% appreciation in value.

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This session upturn was driven by accumulation in stocks like Seplat, Cap. Cadbury, Guinness, UBN, Unilever, Custodian Invest, Neiemth Pharm, Mansard and UPDC, among others. This impacted positively on Year-To-Date gain, which inched up to 14.33%. Market capitalization growth stood at N3.38tr YTD, representing a 17.10% rise over the opening level for the year.

Bullish Sector Indices

Performance indexes across sectors were bullish, led by NGX Energy which gained 5.17%, followed by Insurance, Banking, Consumer and industrial goods with 1.13%, 0.86%, 0.67%, and  0.03% respectively.

Market breadth turned positive, as advancers outnumbered decliners in the ratio of 34:17; just as transactions in volume and value terms were up after players exchanged 759.65m shares worth N5.54bn. Volume was driven by trades in FCMB, Transcorp, Honeywell, FBNH and Aiico.

Cadbury and Multiverse were the best-performing stocks for the session, gaining 10% each, closing at N9.35 and N0.22per share respectively on impressive Q1 numbers and market forces. On the flip side, Champion Breweries and FTN Cocoa lost 6.88% and 5.13% respectively, closing at N2.30 and N0.37 per share, on profit-taking and selloffs.

Market Outlook

We expect the positive trend to continue, being the last trading day of the month and on the influx of better than expected Q1 corporate earnings, as market players take advantage of these numbers to position as investors digest the Q1 numbers and 2021 full-year earnings reports, ahead of March year-end 2022 audited financials with dividend announcements to support uptrend in the new month and oscillating oil prices. Also, the market continues to interpret economic data in relationship with the crude oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend-paying stocks in the hope of dividend announcements, as 2021 Q4 GDP up at 3.98%, while the International Monetary Fund has projected the nation’s economy to grow by 3.4% on rising oil price in the international market.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdataonline.com

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08032055467

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