Expect Improved Sentiments On Q1 Earnings Influx, Positioning Ahead Of Corporate Actions

Market Update for April 27

Profit booking in the midst of volatility and uptrend continued on the Nigerian Exchange at the midweek as the key performance index closed marginally higher on a low traded volume and negative market breadth to side-trend. The market, thereby, extended its 12 consecutive sessions of bull transition on a bargain hunting activities in some of the major sectors and blue chips stocks that supported index despite profit-taking and selloffs.

Market players continue to keenly observe the nation’s economic development, expecting the recent outcome of the Central Bank of Nigeria’s Treasury bill primary market auction to influence the flow of funds into and impact the financial markets. 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 is a noticeable increase in the rate at which listed companies are releasing their Q1 2022 financials, ahead of the April 30, 2022 deadline for the submission of unaudited reports for the quarter-ended March 31. We note some selling pressure as a result of profit taking, while some players are take the strength of the Q1 numbers to position in midst of corporate actions dates and the end-of-month repositioning by fund managers.

There was mixed sentiment and selling interests at the midweek’s session, in the face of the low volume traded, as traders cash out their profits in banking, insurance and petroleum marketing stocks. Tentatively, the continued mixed direction of fixed income market yields and rates of Treasury Bills may trigger flow of funds in or out of equity space, despite the prevailing sideways trend and mixed sentiment in the stock market amidst the ongoing war in Ukraine has influence the market in recent times.

Oscillation in oil price continued as it traded above $103 per barrel at the international market is pushing production cost up, heightening inflationary pressure across the globe and weak economic outlook, 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. 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 low momentum and flat position of the market on Wednesday at the peak of the earnings reporting season has created ‘buy’ signal for smart and discerning traders. However, we warn that market consolidation and corrections are underway, 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.   

The candlestick formation and selling sentiments as at close of midweek’s trading reveals a likely continuation of trends, or reversal, depending on market forces as trading opens Thursday. The NGX index’s action sustained it uptrend to remain in the distribution phase, trading above its 20-day moving average. The benchmark index remains strong and within the 48,500 basis points region which is the strong support level, as volatility persists and uptrend towards the next breakout is sported around 48,704.34bps. Should the index break this point, the next visible resistance is 48,882.68 points.

Technically, the NGX index action is ranging, even as the session’s selling sentiment could be linked to profit-taking in some of the major sectors that rallied recently. The possibility of the market sustaining this trend is a function of impressive numbers and improved economic condition during this season, following which we advise investors to play defensive stocks to reduce investment risks around the market.

Wednesday’s trading opened on the upside and oscillated on selloffs and buying interests in blue-chips, before rebounding to pushed the NGX’s index to an intraday high of 48,620.21 basis points from its lows of 48,551.58bps, before closing slightly above its opening point at 48,571.75bps.

Market technicals were mixed as volume traded was lower than the previous day’s as breadth was negative on a selling sentiment as revealed by Investdata’s Sentiments Report showing 29% ‘buy’ volume and 71% ‘sell’ position. Total transaction volume index stood at 0.89 points, just as the energy behind the day’s performance remained strong with Money Flow Index looked down at 84.93pts, from the previous day’s 90.34pts, indicating that funds left the market, despite closing up.

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Index and Market Caps

The benchmark NGXASI, at the end of midweek, inched up 3.18bps to close at 48,571.75bps, after opening at 48,568.57bps, representing a 0.01%up. Similarly, market capitalization rose marginally by N2bn, closing at N26.19tr, from the previous day’s N26.18tr, which also represented a 0.01% value gain.

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Midweek upturn was driven by accumulation in stocks like Presco, Fidson, Vitafoam, Guinness, BUA Cement, Neiemth Pharm, Mansard and Flourmills, among others. This impacted mildly on Year-To-Date gain, which inched up to 13.71%. Market capitalization growth stood at N3.24tr YTD, representing a 16.81% rise over the opening level for the year.

Mixed Sector Indices

Performance indexes across sectors were mixed, as NGX Banking, Insurance and Energy closed lower with 1.46%, 0.85% and 0.72% respectively, while NGX Consumer goods led the advancers after gaming 0.68%, followed by industrial goods with 0.37%.

Market breadth turned negative, as losers outnumbered gainers in the ratio of 23:18; just as activities in volume and value terms were down, after investors exchanged 246.7m shares worth N2.32bn. Volume was driven by trades in Multiverse, Transcorp, Lafarge, Fidelity Bank and GTCO.

Academy Press and Wema Bank were the best-performing stocks for the session, gaining 9.92% and 9.88%, closing at N1.33 and N3.67per share respectively on market forces. On the flip side, Ikeja Hotel and Livestock Feeds lost 9.58% and 9.50% respectively, closing at N1.40 and N1.62 per share, on profit taking and selloffs.

Market Outlook

We expect improved sentiments on influx of impressive 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 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





Tel: 08028164085, 08032055467

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