Expect Mixed Trend Still, As Investors Take Profit, Await Earnings Inflow, Dividend

Market Update for February 3
The Nigerian equity market rebounded on Thursday, wiping out losses suffered in the previous session on the strength of buying interests in Dangote Cement, ahead of its dividend announcement and submission of the company’s 2021 full-year audited accounts to hit the market any time soon. The rebound also followed investors demand for blue-chip shares in expectation of their paying increased. This reflected in the gainers chart that expanded the market breadth, closing positively on an above average traded volume.
The seesaw movement or volatility witnessed so far in the new month indicates the momentum that comes with earnings season which creates wealth for discerning traders and investors who enter positions low to sell high when these companies release their numbers and announce corporate actions with impressive numbers. It is heartwarming that most unaudited numbers released so far cane healthy, beating analysts’ expectations. These have given an insight into what is expected from these companies by way of final dividends, especially those expected to grow their payout, judging by the Earnings Per Share and established dividend policies.
Technically, the NGX index action has retraced up on an above average traded volume and strong buying interests across the low, medium and high cap stocks to signal the presence of smart money as the market broke out another psychological line at 47,000 again on a high volume to change the trend. Trade metrics revealed strong fundamentals and technicals, as buying sentiments for industrial, insurance and energy stocks were very high during the day’s trading.
Thursday’s candlestick formation supports another uptrend, with the benchmark index trading above the 20, 50 and 200-Day Moving Averages, while momentum indicators were strong and positive, as the ADX read 58.60, RSI closed above 50 at 78.33 and Money Flow Index is looking up at 80.67 points on the daily time frame. The continuation of this trend depends largely on the interplay of market forces and flow of funds into the equity space, as direction of the fixed income market yields remains unclear, in the midst of NTB primary market auction rates declined at the end of thid week’s auction.
Meanwhile, Thursday’s trading opened on the upside and oscillated to sustain the positive trend on buying interests in medium and high cap stocks that pushed the index to an intraday high of 47,335.63 bAsis points, from its lows of 46,860.85bps. Thereafter, the index closed above its opening points at 47,329.80bps.
Market technicals were positive and mixed as volume traded was lower than the previous day’s in the midst of positive breadth and buying pressure as revealed by Investdata’s Sentiment Report showing 99% buy volume. The total transaction volume index stood at 1.06 points, just as momentum behind the day’s performance remained strong. Money Flow Index is looking up at 80.67 points, from the previous day’s 71.91 points, indicating that funds entered the market.  
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Index and Mkt Cap Movement 
At the close of trading on Thursday, the benchmark NGX All-Share Index gained 398.41 basis points, at 47,329.80bps, after opening at 46,930.62bps, representing a 0.85% growth. Market capitalization rose by N215.08bn to N25.50tr, from the opening value of N25.29tr, also representing a 0.85% appreciation in value.
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We note the decision by the Federal Government to postpone its planned removal of subsidy on premium motor spirit, popularly called petrol for another 18 months. Continuing with the planned removal without fixing the refineries and other critical infrastructure would have worsened the already terrible living conditions of most Nigerians, heightening inflation rate and throwing many more investments into a negative real rate of return.

Thursday’s upturn was driven by accumulation in Dangote Cement, Lafarge Africa, Flour Mills, UBN, Redstar Express, Oando, and United capital, among others. This impacted positively on Year-To-Date gain, increasing it to 10.80%. Market capitalization growth increased to N2.88tr YTD, representing a 15.20% rise over the opening level for the year.

Mixed Sector Indices 
Performance indexes across the sectors were mixed, as the NGX Banking and Consumer Goods closed 0.51% and 0.18% lower respectively, while the NGX Industrial Goods led the advancers after gaining 2.68%, followed by Oil/Gas and Insurance with 1.43% and 0.19% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 23:19, while activities in volume and value terms were mixed, after investors exchanged 346.70m shares worth N3.83bn, compared to previous day’s 434.92m units valued at N6.26bn. Volume was boosted by trades in Fidelity Bank, FBNH, GTCO, Transcorp and Oando.

Oando and Academy Press were the best performing stocks for the session after gaining 10% and 9.73% respectively, closing at N5.17 and N1.24 per share on positive market sentiment that followed announcement by Oando of plans to publish it’s 2019-2021 audited and unaudited accounts before this year-end. On the flip side, Pharma-Deko and Champion Breweries lost 10% and 8.70% respectively, closing at N1.98 and N2.40 per share, purely on market forces and profit taking.

Market Outlook
We expect the mixed trend to continue in the midst of profit taking and portfolio realignments by targeting fundamentally sound and dividend paying stocks in expectation of more audited corporate earnings, as oil price oscillates to trade at $89.88, which is one factor that also continues to support economic and market fundamentals.

Also, MPC retain MPR at 11.5% and NTB primary market auction rates declines on short and long tenor should be a plus for the equity market. Just as inflation remain high at 15.63%. Also noteworthy is the oil price that remains above $74 projection of IMF at $90, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.

As market players digest the outcome of the two events during the week and happenings in fixed income market after the NGX index action pullback to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and January Effect rally pattern which has influenced stock prices ahead of audited 2021 earnings season.

The relatively low volume traded in the midst of uptrend and recovery moves are creating new buy opportunities on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the session revealed that institutional players are not buying yet. 

It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position.  Even as 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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