Expect Sustained Positive Sentiments, Uptrend On Inflow Of Full-Year, 2022Q1 Earnings News

Market Update for March 30

Transactions on the Nigerian Exchange at midweek continued its volatility wave to close marginally higher on a buying sentiment and low traded volume in the midst of a slightly negative breadth on the back of the influx of 2021 audited financials with dividend rewards for investors. All these and positioning in MTNN, Ecobank Transnational Incorporated, and Eterna, among others pushed the market into the green ahead of quarter-end window dressing and deadline for submission of 2021 full year earnings reports.

The seeming positive sentiment reflected in some of the major sectors, despite the negative breadth, even as all eyes are on Unilever Nigeria, Julius Berger, Fidelity Bank, Okomu Oil, and others that are yet to file their results for the financial year-ended December 31, 2021. Companies that presented their audited financials during the session and recommended dividend included AXA Marsan Insurance, which offered 25 per share; UACN, 65 kobo; Chemical Allied Products, N1.25 each, Skypower Aviation Handling Company, 16.5 kobo; and Beta Glass, N1.10 each and a bonus of one ordinary share for every five held, as earlier announced. Others that submitted their full-year accounts were AIICO Insurance, SCOA, and MRS Oil.

Regardless of the rebound at the midweek, the market remains on the decline phase with improved buying momentum that may likely support an uptrend on a supply test. However, there is needs to confirm this, especially with bargain hunters still in the market cherry-picking fundamentally sound stocks. There is also the expected market reaction to the dividend and numbers released at this rush hour.

The investing public continues to watch the nation’s economic developments and what is happening in the fixed income market with yields and rates staying mixed and flattish. Already, all eyes are on the plans by Central Bank of Nigeria (CBN), as announced during the last Monetary Policy Committee (MPC) meeting to fulfil its promised intervention in the distribution of premium motor spirit and diesel. The aim is to ease the pains of the scarcity among manufacturers, SMEs and households across the country, in the face of the epileptic power supply.

The late hour rush by listed companies to file their accounts will continue till April 1, 2022, as more are likely to hit the market before weekend, even as notifications of closed periods and board meetings to consider Q1 2022 financials have started, ahead of the Q1 earnings season. We expect bargain hunters to take advantage of the pullbacks to position in expectation of dividend qualification dates, end-of-quarter window dressing by fund managers and repositioning of their portfolios ahead of Q1 actual numbers.

With the renewed buying interest at the close of Wednesday’s trading, investors need not panic at this level but traders should watch their stop-loss and profit targets to adjust positions. Tentatively, the continued mixed direction in the fixed income market yields and declining rates of Treasury Bills may trigger flow of more funds to the equity space.

The ongoing war in Ukraine, and panic selloffs is having its affect the market in recent times, just as investors continue to keep their gaze on the 2023 general elections, amidst uncertainty and the heightening insecurity in the country, following attacks here and there, especially Monday night’s attack on an Abuja-Kaduna train with over 930 persons onboard in Kaduna.

The Eastern European crisis and rising cases of COVID-19 in China, which resulted in the lockdown in some provinces have continued to influence commodities prices, especially crude oil as it now oscillates in the international market, trading above $100 per barrel, after touching $120.27 in the previous days. This has continued to push production costs up, worsening inflationary pressure across the globe and weakening economic outlooks for 2022 and 2023, thereby influencing the monetary policy of central banks as they move to checkmate the impacts of the Russia-Ukraine conflict on the global economy to avoid a global recession.

The price  correction as seen in the NGX index’s action during the earnings reporting season have created ‘buy’ signals for smart and discerning traders. However, we warn that market corrections are not over yet, hence the need to rely on your stop-loss effectively. This is because the oscillating trend signals that a major uptrend is underway, especially when it gets to the level where it is considered good enough for fixed income market players, among others, to jump back into equity positions.  

The candlestick formation at the end of trading reveals that buyers are having the upper hand, a trend that may likely lead to a continuation or reversal, depending on market forces as all eyes are on companies yet to submit their 2021 audited results. The NGX index’s action broke out another minor resistance level of 46,900, trading below its 20-day moving average. As volatility persists and uptrend towards the next resistance level is sported around 46,996.51bps. Should the index break this point, the next visible level is 47,056 points.

Technically, the NGX index is making higher lows, as the session witnessed a buying sentiment that could be linked to repositioning of portfolios ahead of Q1 numbers. The possibility of the market sustaining this trend is a function of impressive payouts and improved economic condition during this last days of earnings filing, following which we advise investors to play dividend stocks to reduce investment risks around the market.

Meanwhile, midweek’s trading opened on the downside and oscillated on buying interests and profit taking in blue-chips that pushed the NGX’s index to an intraday high of 46,916.17 basis points from its lows of 46,824.71bps, before closing above its opening point at 46,904.48bps.

Market technicals were weak and mixed as volume traded was lower than the previous day, in the midst of breadth favoring bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 87% ‘buy’ volume and 13% ‘sell’ position. Total transaction volume index stood at 0.55 points, just as impetus behind the day’s performance remained relatively strong with Money Flow Index looked down slightly at 55.05pts, from the previous day’s 55.55pts, indicating that funds left the market.  

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Index and Market Caps

The composite NGX All-Share Index, at the close of the day trading inched by 61.39bps to close at 46,894.17bps, after opening at 46,843.09bps, representing a 0.13% up. Similarly, market capitalization rose by N32bn, closing at N25.28tr, from the previous day’s N25.25tr, which also represented a 0.13% value gain.

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Wednesday upturn was driven by position-taking in MTNN, ETI, UBA, Ikeja Hotel, Fidelity Bank, Ardova, Honeywell, ETerna and Oando, among others. This impacted mildly on Year-To-Date gain, which inched up to 9.80%. Market capitalization growth stood at N2.63tr YTD, representing a 13.73% rise over the opening level for the year.

Mixed Sector Indices

Performance indexes across sectors were mixed, as the NGX Banking, Consumer and industrial goods closed 0.60%, 0.15% and 0.03% lower respectively, while NGX Insurance led the advancers after gaining 0.62%, followed by Energy with 0.27%.

Market breadth was negative, as losers outnumbered gainers in the ratio of 17:16; just as activities in volume and value terms were mixed, as investors exchanged 201.28m shares worth N2.62bn. Volume was driven by trades in ETI, Accesscorp, Zenith Bank, Fidelity Bank and Transcorp.

Cornerstone Insurance and Ikeja Hotel were the best-performing stocks of the session, gaining 10% each, to close at N0.66 and N1.32 per share respectively on 5 kobo dividend and market forces. On the flip side, Cadbury and Japaul Gold lost 6.67% and 5.88% respectively, closing at N8.40 and N0.32 per share, on selloffs.

Market Outlook

We expect a sustained positive sentiment and uptrend on the influx of corporate actions and 2021 audited financials, as players react to the released numbers and reposition for Q1 2022 earnings expectation, as bargain hunters take advantage of the pullbacks. This is expected to support an uptrend during this earnings season, amidst the oscillating oil prices, just as the market continues to interpret economic data in relationship with crude oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend-paying stocks in the hope of dividend announcements, as 2021 Q4 GDP up at 3.98%, while the International Monetary Fund is calling for a hike in the interest rate and further devaluation of the Naira.

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Sub-Topics

A. Great & Tested Strategies For Trading In Unstable Market, Alhaji Kurfi Garba MD/CEO Apt Securities & Funds Ltd

B. Technical Tools As Timing Edge To Manage Volatility Risk & Identify Buy Opportunities, Mr. Abdul-Rasheed Oshoma Momoh, Head Capital Market at TRW Stockbrokers Ltd 

C. The Power of Earnings in a Post Pandemic Shift & Political Uncertainty, Mr. Ambrose Omordion, Chief Research Officer, Investdata Consulting Ltd

 Take way from this master class:

1. The volatile start to the year in financial markets is set to continue for this year and beyond 2023 election.

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3. How to navigate through this pre-election year environment and its challenges, as market volatility and sector rotation should present good opportunities for discerning traders and investors. 

4. Simple valuation process for stock picking that combines fundamental and technical analyses for your watchlist and stock picks.

5. Hot stocks to deliver 2-time inflation rate returns and gains in 91 days

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdataonline.com

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08032055467

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