Market Update for March 11
The volatility on the Nigerian Exchange continued Monday to open the week on a positive note, after the key performance index closed higher, extending the positive outing for two consecutive sessions on a less than average traded volume and positive market breadth that signal the markup phase as smart money makes effort to move prices on the exchange.
Monday’s reversal pattern needs to be confirmed as market players continue to analyze the 2021 corporate earnings and revaluation of companies on its performance and sector fundamental news to project future potential and growth that will support price and payout ahead of the Q1 earnings expectations, while bargain hunters continue to take advantage of the recent pullbacks to position in undervalued stocks.
This momentum is attributable to the improved buying sentiments across the major sectors of the market and blue chips that pushed the benchmark All-Share index up, on improved liquidity flowing into the equity space, in the face of the uptick in fixed income market yields. This is just as global and domestic cost-pushed inflation crisis continues to threaten economies around the globe. Analysts expect that Q1 corporate scorecards will offer insights into what investors should expect from quoted companies in this pre-election year, especially given the level of uncertainties.
Investdata Research’s mixed outlook for the month of April and the quarter remains, as the filing of first-quarter earnings reports is expected in the midst of corporate actions, qualification, price adjustment, AGM, and payment of dividends by listed companies. However, there is a need to watch the current trends, especially with bargain hunters still in the market cherry-picking fundamentally sound stocks. There are also the expected market reactions to the dividend markdown and payment dates of the companies on the exchange. We note that this Wednesday is the qualification date for BUA Cement’s dividend of N2.60 per share. Others within the week are Stanbic IBTC Holdings, Unilever Nigeria, and FCMB. These are likely to influence the market positively or otherwise.
Market players have continued to watch the nation’s economic developments and what is happening in the fixed income market with yields and rates. Already, all eyes are on the plans by the Central Bank of Nigeria (CBN), as announced during the last Monetary Policy Committee (MPC) meeting to fulfill 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.
Despite, the rebound at the close of Monday’s trading, investors and traders should watch their stop-loss and profit targets to adjust positions. Tentatively, the uptick in the fixed income market yields and oscillating rates of Treasury Bills may trigger the flow of funds into other assets.
The ongoing war in Ukraine and mixed sentiments are having an effect on 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 the recent 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, resulting in fresh rounds of lockdown in some provinces have continued to influence commodities prices, especially crude oil which is now oscillating 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 corrections 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 in charge, a trend that may lead to a continuation or reversal, depending on market forces as all eyes are on companies’ Q1 results. The NGX index’s action broke down another minor support level of 46,800 basis points, trading below its 20-day moving average, as volatility persists and the uptrend towards the next resistance level is sported around 46,846.16bps. Should the index break this point, the next visible level is 46,920.72 points.
Technically, the NGX index is making higher lows, as the session witnessed improved sentiment that could be linked to the repositioning of portfolios ahead of Q1 numbers and reaction to corporate action dates. The possibility of the market sustaining this trend is a function of the state of Q1 numbers and improved economic condition during this Q2, following which we advise investors to play defensive with sectors having strong demand and dividend stocks to reduce investment risks around the market.
Monday’s trading started on the upside and it was sustained for the rest of the session on buying interests and positive sentiment that pushed the NGX’s index to an intraday high of 46,871.63 basis points from its lows of 46,624.78bps, before closing above its opening point at 46,867.95bps.
Market technicals were positive and strong as volume traded was higher than the previous day, in the midst of breadth favoring the bulls on buying pressure as revealed by Investdata’s Sentiments Report showing 99% ‘buy’ volume and 1% ‘sell’ position. The total transaction volume index stood at 0.66 points, just as the impetus behind the day’s performance remained relatively weak with Money Flow Index looking up at 41.63pts, from the previous day’s 34.01pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Monday’s trading, the composite NGXASI gained 238.49bps to close at 46,867.95bps, after opening at 46,631.46bps, representing a 0.51% growth. Similarly, market capitalization rose by N128bn, closing at N25.27tr, from the previous day’s N25.14tr, which also represented a 0.51% value gain.
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The session’s upturn was driven by demand for MTNN, Lafarge Africa, UCap, UBA, Accesscorp, NNFM, Zenith Bank, GSK, UACN, and Caverton, among others. This impacted positively on Year-To-Date gain, which increased to 9.72%. Market capitalization growth stood at N2.52tr YTD, representing a 13.91% rise over the opening level for the year.
Bullish Sector Indices
Performance indexes across sectors were bullish, except for the NGX Energy which closed 0.14% lower, while NGX Banking led the advancers after gaining 2.83%, followed by Insurance Industrial and Consumer goods with 1.38%, 0.22%, and 0.03% respectively.
Market breadth was positive, as gainers outnumbered losers in the ratio of 32:13; just as transactions in volume and value terms were up, as players traded 224.64m shares worth N3.82bn. Volume was driven by trades in GTCO, Zenith Bank, Sterling Bank, Fidelity Bank, and Accesscorp
Nahco and UACN were the best-performing stocks of the session, gaining 10% and 9.90% respectively, to close at N5.50 and N11.10 per share respectively on the impressive payout of 41 kobo dividend and the bonus of 0ne-for-five ordinary shares and market forces. On the flip side, Academy Press and Mutual Benefits Assurance lost 9.60% and 7.69% respectively, closing at N1.60 and N0.24 per share, on profit-taking and selloffs.
We expect the market to sustain the sentiment on bargain hunting as players digest 2021 audited financials and revaluation of quoted companies to reposition for Q1 2022 earnings expectation. 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 the 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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