Equities

Expect Realignments On Earnings Inflow, Economic Data, As NGXASI Awaits Next Resistance Level

Market Update for April 27

It was yet another mixed and volatile Tuesday on Nigerian Exchange (NGX), as the composite All-Share index closed marginally lower on a less than average traded volume, but positive breadth, which halted seven successive sessions of bull-run. This was due to profit-taking by traders in banking stocks, especially those that recently rallied in the midst of earnings season and expectations.

The Q1 numbers released so far from the banking sector had been mixed, but investors are traders are eagerly awaiting those of industry leaders such as Zenith Bank, Access Bank, and FBNH to provide a clear direction for the purpose of repositioning. This is especially after Fidelity Bank, became the very first second-tier bank to submit its earnings, beating market expectations, after posting Earnings Per Share of 33 kobo, compared to the previous 20 kobo in 2020. The 64% growth in its profitability level, from a top line of 8% is a good start for the new financial year (READ MORE).

This mixed trend on the NGX would likely continue beyond this month as income investors follow corporate action dates for dividend qualification and markdown for the rest of the month, and in May. For example, we note that the share prices of Dangote Cement and Caverton Offshore will be adjusted on Wednesday for the N16 and N0.10 dividends respectively proposed by their boards, while 11Plc, Eterna, Lafarge Africa and Berger Paints have their qualification dates between April 29 and 30th, 2021. These qualifications and price adjustments will influence market performance and direction, given that all eyes are now on 2021 Q1 GDP data expected from the National Bureau of Statistics, in anticipation of sincere and concrete moves by the Federal Government to check the rising insecurity in the nation and douse the tension in the land.

Investdata expects trading for the month of April to close slightly up, while the uptrend continues as the movers and shakers of the market are yet to release their Q1 numbers which are likely to support the ongoing recovery moves. This is in the midst of profit taking and rising yields as primary market auction is expected to hold on Wednesday and Thursday.

All things considered, Investdata urges investors to play the market wisely by letting investment goals guide their decisions, especially entry and exit strategies necessary to survive and profit from the expected new trend. Be guided also by current price patterns and money flow index now supporting a trend continuation as funds continue entering the market, just as we expect midweek trading to confirm direction.

Tuesday’s trading started on the downside and oscillated on profit booking and positioning that pushed the key performance index to an intraday low of 39,272.01 basis points, from its high of 39,327.41bps. Thereafter, the index closed slightly below the opening level at 39,305.48bps, even as market technicals were mixed and positive, with volume traded lower than previous day’s.

Market breadth favoured the bulls on mixed sentiments, as revealed by Investdata’s Sentiments Report showing 60% ‘buy’ volume and 40% sell position. Total transaction volume index stood at 0.79 points, just as impetus behind the day’s performance was relatively strong. Money Flow Index was looking up to 62.486pts, from the previous day’s 60.86pts, indicating that funds entered the market, despite the seeming profit taking.

Index and Market Caps

At the close of Tuesday’s trading, the benchmark NGX All Share Index shed a marginal 13.04ps, closing at 39,305.48bps after opening at 39,318.52bps, representing a 0.03% drop, just as market capitalization fell  by N6.82bn, closing at N20.57tr, having opened at N20.58tr, also representing 0.03% value loss. 

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The session’s downturn was due to profit taking instocks like Zenith Bank, Access Bank, Guaranty Trust Bank, UBA, FBNH, and ETI, among others. This impacted mildly on Year-To-Date loss, which increased to 2.40%. The decline in market capitalization also increased to N590.10bn, representing a 2.32% drop below its opening value for the year.

Bullish Sector Indices

The sectorial indexes were bullish, except for NSE Banking that closed 0.6% lower, while Insurance led the advancers after gaining 0.96%, followed by Oil/Gas.

Market breadth was positive, as advancers outnumbered decliners in the ratio of 23:16; with activities in volume and value terms were down as investors exchanged 252.57m shares worth N1.77bn, compared to the previous day’s 329.74m units valued at N2.06bn. Volume was boosted by trades in Access Bank, Transcorp, Fidelity Bank, Guaranty Trust Bank and Zenith Bank.

Prestige Assurance and Wema Bank were the best performing stocks, gaining 9.52% and 8.77% respectively, closing at N0.46 and 0.62 per share on market forces and the four kobo dividend by the latter’s directors. On the flip side, Consolidated Hallmark Insurance and University Press lost 9.09% and 8.55% respectively, closing at N0.30 and N1.17per share, on profit taking.

Market Outlook

We expect the mixed and positive trend to continue as investors continue reacting to the Q1 corporate earnings expected to hit the market this period besides the profit taking, even in the face of rising virus cases across the globe and high yields in fixed income space. We also expect continued portfolio realignments on the strength of earnings performance released so far, ahead of economic data like the 2021Q1 GDP report, and Purchasing Managers’ Index, among others.

Also, the market has moved out of its trading range, waiting to breakout the next resistance level of 39,412.15bps, while trading above the 14 and 20-Day Moving Average. Note that the market may discount the prospects of high cap companies and some blue chip stocks, ahead of their earnings reports.

However, the pullbacks offer bargain hunters and income investors fresh opportunities to reposition in high dividend yields and undervalued stocks, while looking out for quarterly numbers that would support recovery. This is based on the fact that the rising fixed income yields may not be enough to scare all investors away from the equity market.

Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities. This is especially given the rising oil prices that have so far supported the economy and equity market, despite the seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation.

However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by 2020 full numbers and expected 2021 Q1 earnings reports, until the next MPC meeting in May.

The NSE’s index action and indicators are heading in the same direction   on a low traded volume and positive buying sentiments in the midst of rising yield in bond and TB.

Also, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation in the new year.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08032055467

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