Expect Mixed Sentiments, On Positioning Ahead Of Economic Data, More 2021 Financials

Market Update for March 14

Trading activities on the Nigerian Exchange started the week on a negative note after the benchmark NGX All-Share index closed marginally lower with profit-taking resurfacing among the blue-chips and some sectors. This is ahead of more corporate earnings reports and the release of the consumer price index report for February to give investors an insight into the economic direction, to be followed by the Monetary Policy Committee meeting outcome next week.

The mixed sentiment in the midst of high traded volume and negative breadth signals a reversal, or slowdown in the bull transition witnessed in the past three trading sessions of position-taking amidst expectations of more earnings inflow, which has attracted bargain hunters taking advantage of the relatively low prices in recent times. We, however, warn that while the 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, among others to jump into equity positions.  

Also, the geopolitical tension in Eastern Europe lingers with 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 move by world leaders to facilitate peace talks and 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 conflict 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.    

The candlestick formation at the end of Monday’s trading revealed that the market is resisting a further decline, indicating a reversal, or continuation of trend after three sessions of bull transition, as the NGX index’s action seems to short-live a markup phase to remain 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 uptrend towards the next breakout, sported around 47,613.72bps. Should the index break this point, the next visible resistance is far up at 48,000 points.

Technically, the ongoing volatility is best described as a market looking for a strong direction to the north or south, even as Monday’s profit booking could be linked to selloffs in MTN Nigeria, and other stocks 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 in an earnings season, following which we advise investors to play dividend stocks to reduce investment risk around the market.

Meanwhile, Monday’s trading opened slightly on the upside and oscillated on buying interests and profit-taking in high, medium, and low cap stocks, pushing the NGX’s index to an intraday low of 47,358.72 basis points from its highs of 47,466.61bps, before closing marginally below its opening point at 47,428.67bps.

Market technicals were negative and mixed, with volume traded higher than previous days in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 65% ‘buy’ volume and 35% ‘sell’ position. Total transaction volume index stood at 3.37 points, just as momentum behind the day’s performance remained strong with Money Flow Index looked up at 73.15pts, from the previous day’s 68.88pts, indicating that some funds entered the market despite closing lower.

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Index and Market Caps

The composite NGXASI, at the end of Monday’s trading, shed 8.81bps to close at 47,428.67bps, after opening at 47,437.48bps, representing a 0.02% drop. Similarly, market capitalization fell by N4.75bn, closing at N25.56tr, from the previous day’s N25.57tr, which also represented 0.02% value loss.

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Monday’s downturn was driven by selloffs in MTNN, NB, Unilever, Conoil, GTCO, PZ, Eterna and Jaiz Bank, among others. This impacted mildly on Year-To-Date gain, reduced slightly to 11.03%. Market capitalization growth stood at N2.91tr YTD, representing a 15.02% rise over the opening level for the year.

Mixed Sector Indices

Performance indexes across sectors were mixed, as the NGX Banking and Industrial Goods closed 1.15% and 0.12% higher respectively, while the NGX Insurance index led the decliners, after shedding 1.91%, followed by Consumer Goods and Energy with 0.41% and 0.33% respectively.

Market breadth turned negative, as losers outnumbered gainers in the ratio of 22:19; just as transactions in volume and value terms were up, and players traded 1.28 billion shares worth N7.92bn. Volume was driven by trades in FCMB, Fidelity Bank, Zenith Bank, Transcorp and GTCO

RT Briscoe and Ecobank Transnational Incorporated were the best-performing stocks, after gaining 9.59% and 7.27%, closing at N0.80 and N11.80 per share respectively on market forces and corporate action expectation. On the flip side, Eterna and CWG lost 10% each, closing at N5.04 and N0.99 per share, on selloffs.

Market Outlook

We expect mixed sentiment to continue, on positioning ahead of the inflow of economic data and more release of 2021 audited financials with dividend announcement 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





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