Expect Improved Sentiments, As Pullback Lures Traders, Investors Digest February Inflation Data

Market Update for March 15

The benchmark index, which measures the performance of the Nigerian Exchange on Tuesday, declined further amidst the raging volatility and earnings reporting season as equity prices closed lower on profit-taking and portfolio reshuffling while investors and traders await the release of more 2021 audited accounts ahead of the ultimate deadline.

Also on Tuesday, Nigeria’s National Bureau of Statistics published the consumer price index for February 2022, with inflation expectedly increasing by 10bps to 15.7%, besides a 14bps jump in core inflation to 14.0% (the paciest climb since April 2017). The core inflationary pressures mirrored the recent surge in the cost of energy-related products across the country as oil prices continue on the northward spike in the aftermath of the unrest in Eastern Europe, fueling global inflation. Specifically, energy inflation touched a 56-month high of 13.1%, driven by a prolonged period of fuel scarcity and higher AGO and aviation fuel prices. Elsewhere, food inflation was relatively stable at 17.1% in the absence of any food-related shock

The selling sentiment in the midst of low traded volume and negative breadth signals a reversal and change of trend, despite the fact that volume traded was light compared to the previous session, a confirmation that sellers are in charge, a situation that is creating buy opportunities.  However, we warn that market correction is not over yet, the oscillating trend signals that a major uptrend is underway, especially when it gets to the level where it is good enough for fixed income market players as February inflation looks up, among others to jump into equity positions.  

Also, the ongoing conflict in Russia and Ukraine poses a significant risk on stocks and commodities trading, amid the rising cost of crude oil now fueling inflation that is capable of slowing down the global economic recovery and growth in 2022 and beyond, despite pulling back on the move by world leaders to facilitate peace talks and a ceasefire. One negative impact of the ongoing war between Russia and Ukraine is the damage to the global economy, as most of the developing countries depend on wheat imported from both countries in war today, the combination of this and the soaring price of diesel and premium motor spirit, is forcing prices of bread skyward as most bakeries are threatened with a definite shutdown.    

Tuesday’s candlestick formation revealed that the market is likely to decline further unless there is positive information or news to reverse the trend and mood, as the NGX index’s action pulls to the distribution phase, remaining above the seven-day moving average. The benchmark remains within the 47,000 basis points region which is the strong support level, as volatility persists and downtrend towards the next breakdown, sported around 47,287.09bps. Should the index break this point, the next visible support is 47,154,35 points.

Technically, the ongoing volatility is best described as up and down movement, even as the session’s profit-taking could be linked to selloffs in banking stocks, and others that rallied recently, ahead of more 2021 full-year earnings season and Q1 numbers, coupled with expected economic data. The possibility of the market sustaining this trend is a function of impressive numbers and payout during this earnings season, following which we advise investors to play dividend stocks to reduce investment risks around the market.

Meanwhile, Tuesday’s trading started slightly on the downside and it was sustained throughout the session, despite oscillating on profit-taking among all the classes of stocks, a situation that pushed the NGX’s index to an intraday low of 47,334.64 basis points from its highs of 47,431.39bps, before closing below its opening point at 47,349.86bps.

Market technicals were negative and mixed, with volume traded lower than the previous days in the midst of negative breadth and selling pressure sentiment as revealed by Investdata’s Sentiments Report showing 4% ‘buy’ volume and 96% ‘sell’ position. Total transaction volume index stood at 0.49 points, just as the energy behind the day’s performance remained strong with Money Flow Index ticking up at 73.70pts, from the previous day’s 73.20pts, indicating that some funds entered the market despite closing lower.

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Index and Market Caps

At the end of Tuesday’s trading, the NGX All Share Index lost 87.81bps to close at 47,349.86bps, after opening at 47,428,67bps, representing a 0.19% decline. Similarly, market capitalization fell by N47bn, closing at N25.51tr, from the previous day’s N25.56tr, which also represented 0.19% depreciation in value.

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The downturn was driven by selloffs and profit-taking in Seplat, GTCO, NB, Conoil, Zenith Bank, PZ, SCOA, and UBA, among others. This impacted negatively on Year-To-Date gain, reducing it to 10.83%. Market capitalization growth stood at N2.84tr YTD, representing a 14.81% rise over the opening level for the year.

Mixed Sector Indices

Performance indexes across sectors were mixed, as the NGX Insurance, Oil/Gas and Banking closed 1.87%, 1.58%, and 0.09% lower respectively, while the NGX Consumer goods led the advancers, after gaming 0.17%, followed by Industrial Goods with 0.01%.

Market breadth was negative, as losers outnumbered gainers in the ratio of 22:15; just as transactions in volume and value terms were up, and players traded 183.82m shares worth N2.48bn. Volume was driven by trades in UBA, Access Bank, FBNH, UACN, and Zenith Bank.  

VeritasKapita Assurance and Chams were the best-performing stocks, after gaining 4.57% and 4.42%, closing at N0.22 and N0.23 per share respectively on market forces and sentiment. On the flip side, Cornerstone Insurance and Multiverse lost 8.83% and 8.53% respectively, closing at N0.62 and N0.22 per share, on selloffs.

Market Outlook

We expect improved sentiment as bargain hunters take advantage of pullback to position as investors digest inflation data released on Tuesday, ahead of the inflow of more economic data and more release of 2021 audited financials with dividend announcements to support uptrend during this earnings season and oscillating oil prices. Also, the market continues to interpret economic data in relationship with 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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CRO|Investdata Consulting Ltd





Tel: 08028164085, 08032055467