Expect Mixed Sentiments, As Investors, Traders Reposition Portfolios Ahead Q1 Accounts

Market Update for the Week Ended April 1 and Outlook for April 4-8

The Nigerian Exchange last week closed on a bearish note again as mixed sentiment and profit-taking continued, despite the seeming marginal gains due to the quarter-end window dressing in the last two trading sessions of the month of March. During the week also, prices of some stocks were adjusted for dividends declared by their boards.

This has extended the negative outing for the third successive week of bear transition at the peak of the earnings reporting season since the market slipped into its decline phase a fortnight ago, as sellers and buyers battle for dominance in the face of panic selling and cautious trading ahead of the Q1 earnings reporting season in this new month.

Already, profit-taking and price correction in the market have made many stocks suffer losses thereby creating new buy opportunities for discerning traders and investors. We note that the second quarter of each year has always been a period used to position for the year by market players, despite the mixed outlook ahead of the 2023 general elections that have kicked off gradually, with various party congresses and jostling for various positions, with presidential aspirants already trying to outdo themselves with visits to various stakeholders engaging in horse-trading, to get their buy-in. While the investors are keenly observing the political developments, which are reflected in the level of anxiety across the market while waiting for the outcomes of the presidential primaries of the various parties, especially the major ones, to a great extent determine the direction of the market and confidence level of investors.

In all of these, we note that although the participation of foreign investors in our market today is low, the way political parties handle their affairs before the general elections in 2023 will determine if there will be increased investment in Nigeria or not, especially as the foreign exchange remains a major problem.

The bouquet of sanctions imposed on the aggressor in the Russia-Ukraine by the west continues, but Russia is trying to reduce the impact and gravitating toward allies such as China and India, even as the US struck a gas deal with the European Union to help wean the continent off Russian energy dependence. Also, central banks across the world continue to hike rates to checkmate the rising inflation rate, with inflation in matured economies already hitting new highs, thereby changing the global economy direction and expectations for 2022, even while COVID-19 remains potent.  If this war in Ukraine is not put to an end soon, it may lead to another round of global economic depression or recession.

The trading environment and conditions in the domestic market have changed on a low traded volume and mixed sentiments, suggesting that some investors are still taking profit in high cap stocks and blue-chips. This is amidst reactions to the audited full-year 2021 earnings reports that came mixed and below expectation, despite the impressive numbers and high payouts of quoted companies that submitted their financials. Meanwhile, this continued volatility may not be unexpected given the high-level of uncertainty and risks associated with pre-election year.

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Despite, the pullbacks witnessed during the week, the share prices of MTNN, Beta Glass, and Nahco, among others, hit new 52-week highs, as investors reacted to the strong numbers and bonus shares announced.

Movement Of NGXASI

The NGX had a mixed trend as the index action recorded three trading sessions of down market and two up days, thereby extending the bear run to three consecutive weeks, after opening the week on a negative note, losing 0.14%, which short-lived previous Friday’s gain, and lasted till Tuesday when the index fell by another 0.15%. The trend was halted at the midweek and Thursday when the market gained 0.15% and 0.16% respectively on the end of quarter trading account balancing by Fund managers and others but was short-lived on Friday as the NGX All-Share index lost 0.26% that brought the week’s total loss to 0.26%, compared to the previous week’s decline of 0.67%.

In all, the key performance index lost 121.37 basis points, closing the week at 46,842.86bps, after touching an intra-week low of 46,754.39 points, and a high of 46,983.32bps. Recall that the week opened with the index at 46,964.23bps, just as market capitalisation fell by N85.70bn, closing at N25.25tr, from the previous week’s N25.31tr, which also represented a 0.26% value loss.

Despite the pullback during the week, high, medium, and low cap stocks dominated the top advancers table, as market news and last hour submission of 2021 audited accounts hit the market to drive demand for some stocks, with players taking advantage of the ongoing corrections to buy-in.

We note that corporate earnings released during the week impacted the NGX index, despite the mixed sentiment as sellers and buyers battle for control, a situation that was reflected in major sectoral indexes which closed lower. This followed the markdown of Zenith Bank, Custodian Investment, GTCO, and others, dragging the market down on a high traded volume.

Market breadth was negative for the week due to profit-taking and selloffs ahead of more price adjustments for dividends recommended. This is likely to support the mixed market in the short term, while Q1 numbers and other economic news may drive recovery in the long run, as investors increase their positions in higher dividend payouts and yields.

During the week, losers outnumbered gainers in the ratio of 50:20 on mixed sentiments, as revealed by the investor sentiment report showing 39% ‘buy’ volume and 61% sell position. Money Flow Index, however, declined to 58.52bps from the previous week’s 63.55 points, an indication that funds left the market.   

The NGX’s index action remains relatively strong on a weekly time frame, as pullbacks persist for the third straight trading week on a mixed sentiment at below its seven-day moving average and above the 20DMA. The candlestick formation, at the end of the week showed that the market is resisting decline, as market players digest the 2021 audited financials already released to reposition their portfolios for Q2 and give market direction. The candlestick pattern indicates a possible reversal of trend or continuation, depending on market forces in the new week being the first full trading week of April. Meanwhile, long-term market recovery is still strong. Also, all eyes are on the fixed income market yields and oil prices to further support market fundamentals and attract liquidity to the equity space. The NGX at this point is creating new buying opportunities for dividend income investors.

Bearish Sectoral Indices

All the sectorial performance indexes for the week were in red, led by NGX Banking, which lost 7.13%, followed by Energy, Consumer Goods, Insurance, and Industrial with 3.41%, 1.84%, 0.22%, and 0.07% respectively.

Activities in volume and value terms were mixed as stockbrokers traded 1.29bn shares worth N13.55bn, compared to the previous week’s 1.18bn units valued at N16.6bn. This volume was driven by Financial Services, Conglomerates, and ICT industry stocks, Fidelity Bank, Transcorp, Accesscorp, Chams, and GTCO

Meyer and Cornerstone Insurance were the best-performing stocks for the week, gaining 30.91% and 13.79% respectively, closing at N0.72 and N0.66per per share on market sentiment and a dividend of five kobo. On the flip side, Berger Paints and Zenith Bank lost 18% and 16.73% respectively, at N6.15 and N22.40 per share, purely on selloffs and price adjustment for the proposed dividend of N2.80.

Outlook for the week

We expect mixed sentiments in the new week, as players analyze 2021 audited accounts, in the midst of dividend announcements and portfolio repositioning for Q2 ahead of Q1 accounts. Also, investors and traders continue reacting to the earnings power, as the revaluation of quoted companies on their earnings performance and growth prospects continue ahead of Q1 2022 numbers. We note that income investors continue buying into dividend-paying stocks,

We want to appreciate as many that joined us at the Q2 Master Class at the weekend, we look forward to seeing you take actions that would make the difference in your portfolio in this Q2 and beyond.

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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605

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