Market Update for March 4
It was a mixed trading session on the Nigerian Exchange on Monday, as the first full trading week of April started on a negative outing, thereby extending the bear run for two consecutive sessions on a low traded volume and positive market breadth, as selling sentiment and profit-taking continued in the midst of volatility wave.
The increased momentum in decline was attributed to price adjustments in Lafarge Africa for its dividend of N1.00 proposed by the directors and losses suffered by blue chips that dragged the benchmark index down as liquidity in the equity space continued to decline with funds moving to other investment windows, especially as fixed income market yield curve continued to expand. This is just as market players continue to digest the recently released full-year audited accounts of listed companies to reposition their portfolios ahead of Q1 earnings season that will give insights into what investing public should expect from quoted companies in 2022 being pre-election that comes with uncertainties.
Investdata Research’s mixed outlook for the month of April remains as filing of first-quarter earnings reports in the midst of corporate actions of qualification, price adjustment, AGM, and payment of dividends by listed companies. However, there is need to watch the current trends, especially with bargain hunters still in the market cherry-picking fundamentally sound stocks. There is also the expected market reaction to the dividend and numbers released during the rush hour.
The investing public continues to watch the nation’s economic developments and what is happening in the fixed income market with yields and rates staying mixed and flattish. Already, all eyes are on the plans by the Central Bank of Nigeria (CBN), as announced during the last Monetary Policy Committee (MPC) meeting to fulfill its promised intervention in the distribution of premium motor spirit and diesel. The aim is to ease the pains of the scarcity among manufacturers, SMEs, and households across the country, in the face of the epileptic power supply.
With the continued selloffs at the close of Monday’s trading, investors need not panic at this level but traders should watch their stop-loss and profit targets to adjust positions. Tentatively, the uptick in the fixed income market yields and oscillating rates of Treasury Bills may trigger the flow of funds into other assets.
The ongoing war in Ukraine, and panic selloffs is having its affect on the market in recent times, just as investors continue to keep their gaze on the 2023 general elections, amidst uncertainty and the heightening insecurity in the country, following attacks here and there, especially Monday night’s attack on an Abuja-Kaduna train with over 930 persons onboard in Kaduna.
The Eastern European crisis and rising cases of COVID-19 in China, resulting in fresh rounds of lockdown in some provinces have continued to influence commodities prices, especially crude oil which is now oscillating in the international market, trading above $108 per barrel, after touching $120.27 in the previous days. This has continued to push production costs up, worsening inflationary pressure across the globe and weakening economic outlooks for 2022 and 2023, thereby influencing the monetary policy of central banks as they move to checkmate the impacts of the Russia-Ukraine conflict on the global economy to avoid a global recession.
The price corrections as seen in the NGX index’s action during the earnings reporting season have created ‘buy’ signals for smart and discerning traders. However, we warn that market corrections are not over yet, hence the need to rely on your stop-loss effectively. This is because the oscillating trend signals that a major uptrend is underway, especially when it gets to the level where it is considered good enough for fixed income market players, among others, to jump back into equity positions.
The candlestick formation at the end of trading reveals that sellers are having the upper hand, a trend that may likely lead to a continuation or reversal, depending on market forces as all eyes are on companies’ Q1 results. The NGX index’s action broke down another minor support level of 46,800, trading below its 20-day moving average. As volatility persists and the uptrend towards the next support level is sported around 46,540.19bps. Should the index break this point, the next visible level is 45,000 points.
Technically, the NGX index is making higher lows, as the session witnessed a selling sentiment that could be linked to the repositioning of portfolios ahead of Q1 numbers. The possibility of the market reversing this trend is a function of impressive payouts and improved economic condition during this Q1 earnings filing, following which we advise investors to play defensive with sectors having strong demand and dividend stocks to reduce investment risks around the market.
Meanwhile, Monday’s trading opened on the downside and oscillated on selloffs and position taking in blue-chips that pushed the NGX’s index to an intraday low of 46,654.45 basis points from its highs of 46,844.13bps, before closing below its opening point at 46,687.85bps.
Market technicals were negative and mixed as volume traded was lower than the previous day, in the midst of breadth favoring bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 18% ‘buy’ volume and 82% ‘sell’ position. The total transaction volume index stood at 0.62 points, just as the impetus behind the day’s performance remained weak with Money Flow Index looked down slightly at 23.81pts, from the previous day’s 24.02pts, indicating that funds left the market.
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Index and Market Caps
The composite NGX All-Share Index, at the close of the day’s trading, inched by 130.13bps to close at 46,687.85bps, after opening at 46,842.86bps, representing a 0.33% decline. Similarly, market capitalization rose by N75bn, closing at N25.17tr, from the previous day’s N25.25tr, which also represented a 0.33% value loss.
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Monday’s downturn was driven by selloffs and profit-taking in MTNN, Lafarge Africa, UBA, Accesscorp, FBNH, Zenith Bank, PZ, Guinness and NGXGroup, among others. This impacted negatively on Year-To-Date gain, which reduced to 9.30%. Market capitalization growth stood at N2.40tr YTD, representing a 13.21% rise over the opening level for the year.
Mixed Sector Indices
Performance indexes across sectors were mixed, as NGX Banking, industrial goods, and Insurance closed 0.99%, 0.43%, and 0.32% lower respectively, while NGX Energy led the advancers after gaining 0.27%, followed by Consumer goods with 0.20%.
Market breadth was positive, as gainers outnumbered losers in the ratio of 22:19; just as activities in volume and value terms were down, when investors exchanged 219.50m shares worth N1.93bn. Volume was driven by trades in Transcorp, Fidelity Bank, UBA, Zenith Bank, and Accesscorp
Redstar Express and Nahco were the best-performing stocks of the session, gaining 10% and 9.79% respectively, to close at N2.97 and N4.71 per share respectively on earnings expectation and dividend of 41kobo and 1:5 bonus. On the flip side, Regency Insurance and Japaul Gold lost 9.68% and 8.82% respectively, closing at N0.28 and N0.31 per share, on selloffs.
We expect improved sentiment and a reversal on bargain hunting as players digest 2021 audited financials to reposition for Q1 2022 earnings expectation. This is expected to support an uptrend during this earnings season, amidst the oscillating oil prices, just as 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 is calling for a hike in the interest rate and further devaluation of the Naira.
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