Expect Improved Sentiments On Buying Interests, Inflow Of Corporate Actions, Q1 Positioning

Market Update for March 28

The bears dominated trading forced the Nigerian Exchange Monday to start the week on mixed sentiment amidst buy interests and profit-taking, following which the NGX All Share Index closed lower, reversing the previous session’s positive outing on price adjustment of Zenith Bank and Custodian Investment for dividends of N2.80 and 40 kobo per share respectively, which dragged the market further down.

Monday’s negative outing wiped away the previous session gain, extending the decline phase of the market, despite resisting significant downward pull that would have formed a hammer candlestick. This signals reversal of trend on a low traded volume and flat breadth, which however, needs to be confirmed, especially with bargain hunters still in the market cherry picking fundamentally sound stocks ahead of quarter-end window dressing and deadline for submission of 2021 audited accounts and corporate actions.

Market players continue to keenly observe the nation’s economic developments and what is happening in the fixed income market with yields and rates becoming mixed and flattish. Already, all eyes are on the plans by Central Bank of Nigeria (CBN), as announced during the last Monetary Policy Committee (MPC) meeting for the 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.

There is a noticeable increase in the rate at which listed companies are giving notice of their closed periods and board meetings to consider their Q1 2022 financials, ahead of Q1 earnings season and actual performance as portfolio managers and investors reposition their portfolio for Q2 2022.  We note the renewed buying interests. For instance, bargain hunters are taking advantage of the pullbacks to position in expectation of dividend qualification dates, and the end-of-quarter window dressing by fund managers.  Also, the market reacted negatively as expected to Transcorp Plc’s audited financials for year-ended December 31, 2021, especially the board’s offer of a miserly two kobo dividend per share, despite the impressive numbers posted for the period.

With the mixed sentiment and profit-taking at the close of Monday’s trading, investors need not panic at this level. Tentatively, the continued mixed direction in the fixed income market yields and declining rates of Treasury Bills may trigger flow of more funds to the equity space, as noticed at the end of trading yesterday. The ongoing war in Ukraine, and panic selloffs have affect the market in recent times.

The eastern Europe crisis and rising cases of Covid 19 in China, which resulted in the lockdown in some provinces have continue to influence commodities prices, especially oil prices that is oscillating in the international market to trade around $115 per barrel, after touching $120.27 in the previous day. This has continued to push production cost up, heightening 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 impacts of the Russia-Ukraine conflict on the global economy to avoid global recession.

These pullbacks as seen in the NGX index’s action during the earnings reporting season has 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 buyers are having the upper hand, despite closing lower, a trend that may likely lead to a continuation or reversal, depending on market forces as all eyes are on companies that are yet to submit 2021 audited results. The NGX index’s action broke down another support level of 46,900, trading below its 20-day moving average. As volatility persists and downtrend towards the next support level is sported around 46,800.34bps. Should the index break this point, the next visible level is 46,628.19 points.

Technically, the NGX index is making higher lows, even as Monday’s session had a mixed sentiment that could be linked to bargain hunters’ activities and profit taking in some major sectors that rallied recently. The possibility of the market reversing this trend is a function of impressive payouts and improved economic condition during this last days of earnings filing, following which we advise investors to play dividend stocks to reduce investment risks around the market.

Meanwhile, Monday trading opened on the downside and oscillated on selloffs and buying interests in blue-chips that to pushed the NGX’s index to an intraday low of 46,754.39 basis points from its highs of 46,966.36bps, before closing below its opening point at 46,961.62bps.

Market technicals were weak and mixed as volume traded was higher than the previous day, with flat breadth on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 68% ‘buy’ volume and 32% ‘sell’ position. Total transaction volume index stood at 0.97 points, just as momentum behind the day’s performance remained relatively strong with Money Flow Index looked up at 60.21pts, from the previous day’s 56.31pts, indicating that funds entered the market, despite closing lower.

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Index and Market Caps

The benchmark NGXASI, at the close of the day trading shed 66.00bps to close at 46,898.86bps, after opening at 47,964.23bps, representing a 0.15% drop. Similarly, market capitalization fell by N31bn, closing at N25.27tr, from the previous day’s N25.31tr, which also represented a 0.15% value loss.

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Besides the price adjustment, Monday’s downturn was driven by profit-taking in UBN, FBNH, FCMB, NPF Microfinance, Learn Africa and Fidelity Bank, among others. This impacted negatively on Year-To-Date gain, which reduced to 9.78%. Market capitalization growth stood at N2.62tr YTD, representing a 13.71% rise over the opening level for the year.

Mixed Sector Indices

Performance indexes across sectors were mixed, as the NGX Consumer and Industrial Goods closed 0.18% and 0.06% higher respectively, while NGX Banking led the decliners after losing 4.42%, followed by Insurance and Energy with 0.30% and 0.12% respectively.

Market breadth was at par, as gainers were equal to losers in the ratio of 18:18; just as activities in volume and value terms were mixed, as stockbrokers exchanged 359.89m shares worth N2.61bn. Volume was driven by trades in Transcorp, Sterling Bank,  Fidelity Bank, Linkage Assurance and Accesscorp.

BetaGlass and PZ were the best-performing stocks for the session, gaining 9.92% and 9.68%, to close at N58.20 and N10.20 per share respectively on dividend of 1.10/ bonus of one for five ordinary shares and impressive earnings Q3. On the flip side, Learn Africa and Unity Bank lost 9.68% and 8.16% respectively, closing at N1.96 and N0.45 per share, on profit taking and selloffs.

Market Outlook

We expect improved sentiments on increasing buying interest ahead of more corporate action and positioning for Q1 2022 earnings expectation, as bargain hunters take advantage of the pullbacks. 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 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





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