Expect Mixed Trend On April Inflation Report, MPC Meeting, More Earnings

Market Update for the Week Ended May 13 and Outlook for May 16-20

Trading activities on the Nigerian Exchange Limited extended its bullish run and positive buying sentiment for the fifth successive week, as prices of many equities hit a new highs, despite the mixed trend and profit-taking activities that showed up during the period. The benchmark NGX All Share index (NGXASI) closed higher on a very high traded volume and positive breadth, amid the increased buying interests across all sectors, except insurance that experienced a pullback.

The higher prices of stocks impacted the index positively, as it crossed the 53,000 mark to touch 53,100.21 basis points after breaking out the strong 53,064.58 and 53,069.29bps resistance levels to extend the bull-run.

The galloping market was sustained on the local front, despite the tightening monetary policy of central banks across the globe in their bid to control high inflation rates, which has led to panic selloffs in some matured market, as investors and traders stayed with cash to protect their portfolios and funds. Despite this, and the ongoing war in Eastern European, stock that hit new 52-week highs on the Nigerian bourse included Seplat Energy, Dangote Cement, International Breweries, PZ Cussons, Okomu Oil and its archrival- Presco, Fidson Healthcare, University Press, SAHCOL, McNichols, as well as Flour Mills. The uptrend was also despite adjustments in the share prices of Cadbury and NPF Microfinance for dividends of 50 kobo, and 10 kobo recommended by their boards.

Also, all eyes are on macroeconomic indices like Q1 2022 GDP and consumer price index, beginning with the April inflation reports which the according to the timetable of the National Bureau of Statistics (NBS) will be released on Monday. The Purchasing Managers Index for the month of April expanded to 55.8 points from March position 54.1 points, indicating an increased business activities in the private sector. It is noteworthy that a higher inflation rate will further threaten the negative real returns in the fixed income market.

The ongoing bull-run has supported the flow of funds into the equity space amid the persisting transition for the fourth consecutive week, on positive momentum and low price attractions as revealed by the low Price to Earnings Ratio (market PE ratio), as indicated by the recent revaluation based on the impressive 2021 and Q1 2022 corporate earnings. Also, earnings and dividend yields in the stock market are better than those from the fixed income side in the face of rising inflation, which has triggered the flow of funds into equities as revealed by the Money Flow Index. There has also been a noticeable improvement in transaction volume on a daily and weekly time frame, while also trading above the 20 and 50-day moving averages. This is despite the market volatility and uncertainty surrounding Nigeria’s pre-election year.

Meanwhile, the trading environment and conditions in the Nigerian market have changed on improved traded volume and positive sentiments, suggesting that more investors are buying into blue chips at a time of price adjustments for dividends. This is amidst reactions to the 2021 corporate actions and impressive Q1 earnings released, as reflected in the high earnings yields of most quoted companies that submitted their financials. The continued volatility may not be unexpected, given the high level of uncertainty and risks associated with a pre-election year.

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Movement Of NGXASI

It was another bullish week, as the NGX index recorded four trading session of up markets and one that closed south due to profit taking in MTNN and BUA foods. Trading started on a positive note, extending the previous day uptrend as index gained 1.92% on Monday, which was however short-lived on Tuesday when the market pulled back 0.19%. There was a rebound at midweek, with the market closing 1.99% higher on strong buying interests in Agribusiness, industry goods and telecoms sectors. This trend was sustained on Thursday and Friday as the index with by 0.15% and 0.30% green respectively, bringing the week’s total gain to 4.25%, compared to the previous week’s 2.61% positive position.

Investors’ fortune expanded strongly as market capitalization also soared by N1.17tr. The rally lifted the market indicators higher, with year-to-date return jumping to 24.30%, as a result of buying interests in value, and growth stocks.

Hot money is returning to the equity space as institutional investors position, making efforts to move prices higher, despite the low participation of foreign investors in the market, according to the Nigerian Exchange report. This means that domestic portfolios investments are on the rise.

Consequently, the benchmark index gained 2163.43 basis points to close the week at 53,098.46 bps, after touching an intra-week high of 53,100.21 bps, from its lows of 50,922.91bps. Recall that the week opened with the index at 50,935.03bps, just as market capitalisation rose by N1.2tr, closing at N28.63tr, from the previous week’s N27.46tr, which also represented a 4.25% appreciation in value.

Stock prices continued to rally during the week as low, medium, and high cap stocks dominated the top gainers’ chart, amid buying pressure and repositioning of portfolios ahead of the April consumer price index and MPC meeting, as investors are taking advantage of high earnings yields and breakouts to accumulate positions.

Market breadth for the week was positive, as gainers outnumbered losers in the ratio of 50:32 on positive sentiments, as revealed by the investor sentiment report showing 100% ‘buy’ volume. Money Flow Index was up at 55.28bps from the previous week’s 54.81 points, an indication that funds enter the market on a weekly and daily time frame to confirm the inflow of funds into equities.

The NGX index’s action remains strong on a weekly, and mixed on the daily charts, trading above the ‘T’ line on the bullish engulfing candles to breakout the major strong resistance levels of 53,000 points on a high traded volume to trade above 20- and 50-day moving average to reveal strength. The candlestick formation, at the end of the week, showed that the market is on an uptrend, as players digest the Q1 numbers already released to reposition their portfolios for Q2. The candlestick pattern indicates a possible continuation of the trend, depending on market forces in the new week as last Friday’s trading pattern revealed buyers are in charge.

Bullish Sectoral Indices

Sectorial performance indexes for the week were in green, except for NGX Insurance index that closed 1.92% lower, while NGX Oil/Gas led the advancers, gaining 6.94%, followed by Consumer goods, Industrial Goods and Banking with 5.38%, 2.33% and 0.04% respectively.

Transactions in volume and value terms were up as stockbrokers traded 1.82bn shares worth N27.19bn, compared to the previous week’s 1.60bn units valued at N19.60bn. Volume was driven by Financial Services, Conglomerates, and Consumer goods, especially by trades in Transcorp Plc, GTCO, Jaiz Bank, International Breweries and Accesscorp.  

McNichols and Royal Exchange were the best-performing stocks during the week, gaining 59.52% and 51.49% respectively, closing at N1.34 and N1.53 per share on market sentiments and forces. On the flip side, Academy Press and Ikeja Hotel lost 13.71% and 10.94% respectively, at N1.51 and N1.14 per share, purely on profit-taking and selloffs.

Outlook for the week

On the strength of the April inflation report and next week’s MPC meeting, we expect mixed  trend in the new week, as Q4 and Q1 corporate earnings hit the market ahead of economic data, just as portfolio repositioning for Q2 will continue as market players analyzing economic data and numbers to guide their decision. Also, investors and traders continue reacting to the earnings power, as the revaluation of quoted companies on their earnings performance and growth prospects continue. We note that income investors have sustained buying into dividend-paying stocks,

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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605