Expect Mixed Trend On Economic Data, Release Of More 2021 Financials

Market Update for February 16

Volatility on the Nigerian Exchange continued at the midweek, as the benchmark NGX All-Share index closed marginally higher on a positive momentum, thereby extending its positive outing for the two consecutive session, despite the seeming calmness that had dominated trading activities in recent time. This is not unexpected, as all eyes are on the expected 2021 audited financial reports and dividend declarations that would influenced the index and price actions positively or negatively, depending on investor sentiments, or vibes and liquidity. 

The mixed trend in the face of renewed buying sentiment and negative market breadth on above average traded volume indicates accumulation of positions by investors and traders as portfolio repositioning persists ahead of the corporate numbers after the pullbacks.  

The positive macroeconomic data, better-than-expected corporate earnings released so far, in addition to the rising price of crude oil in the international market, and the prevailing and relatively low interest rates, have revealed the true state of the nation’s economy as all eyes look to the expected release of the Q4 GDP data.

Noteworthy also is the fact that investors and fund managers are continuing their search for greater returns on their investments, which is likely to drive funds to blue-chips as companies announce their dividend payout plans. The mixed sentiment in the face of market volatility continued as the benchmark index closed slightly higher, amid the ongoing volatility which comes with the earnings reporting season. Here, we advise that investors and traders should allow their stop-loss and profit targets guide them, while removing every emotions.

Technically, the NGX’s index action, maintained a positive stance, trading above the 47,000 mark, signaling a change in momentum and trend as index actions and indicators are becoming bearish, looking the same direction in the midst of mixed sentiments on a high traded volume. Investors need to watch this, as funds are not flowing into the market as expected. Trade metrics for the session revealed a decrease in profit-taking, ahead of corporate actions hitting the market any moment from now, while some stocks like Learn Africa, RT Briscoe, Fidelity Bank and Flour Mills, among others hit their new 52-week highs at the close of trading.

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Index and Mkt Cap Movement 

The composite NGXASI at the end of the day’s trading, inched up by 44.43 basis points at 47,109.25bps, after opening at 47,064.82bps, representing a 0.09% up, just as market capitalization crawled N23bn up, closing at N25.39tr, from the opening value of N25.36tr, also representing a 0.09%  value gain.

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Midweek’s upturn was driven by buying interests in Airtel Africa, MTNN, UACN, Stanbic IBTC, NEM, FCMB, Learn Africa and SCOA, among others. This impacted mildly on Year-To-Date gain, as it increased to 10.28%, while market capitalization growth stood at N2.73tr YTD, representing a 14.56% rise over the opening level for the year.

Bearish Sector Indices 

Performance indexes across the sectors were down, as the NGX industrial Goods led the decliners after losing 0.34%, followed by Banking, Consumer Goods, Energy and Insurance with 0.20% 0.09%, 0.04% and 0.04% respectively.

Market breadth turned negative as losers outpaced gainers in the ratio of 29:19, while transactions in volume and value terms were up, as investors exchanged 318.27m shares worth N8.26bn, compared to previous day’s 274.21m units valued at N5.67bn. Volume was boosted by trades in Access Bank, MTN Nigeria, Zenith Bank, UBA and NB. 

Learn Africa and SCOA were the best performing stocks for the day, gaining 9.94% and 9.55%, closing at N1.99 and N1.95 per share on market sentiment and forces. On the flip side, UPDC and Regency Insurance lost 6.36% and 5.13% respectively, closing at N1.03 and N0.37 per share, on profit-taking.

Market Outlook

We expect mixed trend on interoperation of economic data and  release of more 2021 audited financials with corporate actions to boost positive vibes during this earnings season as market interpret the inflation reports that was released, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend paying stocks in hope of dividend announcements, as oil trades at $94pb, just as inflation rate moderates at 15.60%, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.

Meanwhile, market players continue to digest the quarterly and unaudited 2021 full-year results available in the market and what is happenings in fixed income market after the NGX index pulled back slightly to trade above its 50-Day Moving Average on a low sell volume in the face of assets rebalancing and the changing patterns in February as the investors look forward to more audited 2021 earnings reports.

The relatively low volume traded in the midst of volatility and recovery moves are creating new buy opportunities on the strength of corporate numbers and economic data. Also, candlestick formation and volume traded during the session shows that institutional players are not buying yet. It is equally noteworthy that during a ranging market many players sit on the fence waiting for a breakout, or down before jumping into any position. Even so, many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield capable of serving as a hedge against inflation.

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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605

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