Expect Mixed Sentiments Still, As Investors Digest January Inflation data, Earnings Inflow

Market Update for February 15

The positive performance of the Nigerian Exchange continued at the midweek amid buying interests in blue chips, among others supporting the composite NGX All-Share index to close marginally higher on a low traded volume and positive breadth. This extended the bullish upbeat for the third consecutive session on a stronger momentum and buying pressure.
Also on Wednesday, the National Bureau of Statistics (NBS) released the January consumer price index with inflation rate resuming a northward movement at 21.82%, from the 21.34% recorded in December 2022, a drop from the November level. The January upward movement resulted from the increase in tariff, scarcity of Premium Motor Spirit, translating to a spike in transportation and other cost, which further impacted prices of goods and services. The rise in inflation data initially boosted by the ongoing war between Russia and Ukraine which started on February 24 last year has led to the Central Bank of Nigeria adjusted its benchmark Monetary Policy Rate by 600 basis points upward to fight inflation since May 2022. This measure alone has not achieved it purpose owing to the various triggers of inflation that may not have been envisaged initially, and in the face of the divergence between the MPR and interest rates in the fixed income market. This has led to a widening of the negative returns in this space made worse by the rising inflationary condition as revealed by the latest figures.
In the face of rising inflation and declining rates and yields in the fixed income market, portfolio reshuffling to hedge against inflation will continue to favour sectors and stocks with high dividend yields and strong earnings to support high payouts. Strong fundamentals and earnings makes banking stocks more appealing to investors due to their consistent in dividend payment over the years. The numbers from the banks have given an insight into what players should expect in this season, even as the expected release dates of these companies and presidential election draw closer.
The market’s upbeat and uptrend nature are expected to be strengthened on the back of corporate actions and earnings of early filers and others in the near term and during post earnings season before the governorship election or after, due to price adjustment for dividend declared. Meanwhile, buying sentiments continue across some major sectors of the market, except for banking, consumer goods and energy that were hit with profit taking. The actual state of the audited earnings reports will give a clear direction, just as it may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the coming 2023 general elections.
Technically, the NGX index’s action had signal markup phase which support the bullish V-shape chart and top patterns that signals reversal or continuation of trend on a daily and weekly time frame. Just as there is a bearish divergence between the index action and MACD on a dally chart that supports price correction, due to mixed sentiment in blue chip stocks. Let us keep our gaze on market forces and money flow.
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Oil price oscillation continued, pulling back to trade at $84.68 per barrel, on massive crude build pressure and uptick in US consumer price index in the midst of rising attacked on Ukraine. Just as the geopolitical tension, high interest rate and inflation across the globe continue to threaten the world. Also, supply tightened due to the Russia-Ukraine war that has lingered so far. The up and down movement of oil price also continues to drive volatility across markets.
Midweek trading opened slightly in the downside, but rebounded in the late afternoon, on buying interest Wapco, Genegu and other low priced stocks, despite profit taking, pushing the NGXASI to an intraday high of 54,513.40 basis points from its lows of 54,475.40bps, before closing slightly above its opening figure at 54,507.70bps.
Market technicals were positive and mixed with lower volume of trade, compared to the previous session in the midst of breadth favoring bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 85% buy position and 15% sell volume. The total transaction volume index stood at 0.45 points, just as impetus behind the day’s performance was strong as Money Flow Index looked flat at 85.57pts, from the previous day’s 85.57pts, indicating that funds entered the market.
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Index and Market Caps
The key performance NGXASI, at the close of Wednesday’s trading inched up by 11.36 basis points, closing at 54,507.66bps, after opening at 54,496.31bps, representing a 0.02% up, just as market capitalization rose by N6.181bn closing at N29.69tr from the previous day’s N29.68tr, which also represented a 0.02% value gain.
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Meanwhile, Wednesday’s upturn was driven by position taking in the shares of Wapco, Geregu Power, Nahco, Aiico, Etranact and Tripple Gee among others, which impacted mildly on Year-To-Date gain to 6.35%. Market capitalization YTD gain increased at N1.87tr, representing 6.35% above its opening level for the year.

Mixed Sector Indices
Sectorial performance indexes for the session were mixed, as NGX Insurance and Industrial goods closed 0.86% and 0.07% higher respectively, which NGX Banking led the decliners after losing 0.08%, followed by Consumer goods and Energy with 0.07% and 0.05% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 20:16, while activities in volume and value were down, as stockbrokers crossed 134.56m shares worth N4.36bn. Volume was driven by trades in GTCO, UBA, Aiico, FBNH and Accesscorp.
Tripple Gee and Linkage Assurance were the best performing stocks after gaining 10% and 7.14% respectively, closing at N1.65 and N0.45per share respectively on market forces. On the flip side, Japaul Gold and Sovereign Trust Insurance lost 6.67% each, closing at N1.28 and N0.30per share, purely on profit taking.

Market Outlook
We expect mixed and positive sentiments to continue as market players digest January CPI data in the midst of impressive corporate earnings and portfolio rebalancing. As all eyes are on inflation report today, amidst the release of more audited earnings, falling rates and anxiety over the election uncertainty. Any pullback at this point may add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

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