Falling Rates Lure More Investors To Equities, Amid Portfolio Rebalancing On Earnings, Inflation, Election Worries

Market Update for February 13

The nation’s stock market entered a critical level of a breakout or fake out position as the sideways movement continued on mixed sentiments and trend to close marginally higher on low traded volume and positive breadth. This halted the previous sessions of loses to open the week on a positive note Monday, as buyers dominated the session ahead of more corporate earnings expectation and macroeconomic data, while market players look forward to the January consumer price index reports.
With the prevailing disconnection between the monetary policy rate of 17.5% and the declining rates in the fixed income market continue, especially the 10 year and 15 years FGN Bond auction rates that had declined as seem in recent times, TB offers in the face of high inflation makes the stock market more attractive in the short-term. This is due to ongoing earnings season and high dividend to hedge against inflation, looking at the impressive numbers which are expected to support higher payout or dividend growth in this season, despite the election dates drawing closer for presidential and national assembly polls.
At the end of Monday’s trading, the market maintained its strong momentum, as buying interest increased in some stocks with value which had pulled back recently, as index action range to confirm a direction at the opening of Tuesday trading. On the strength of the expected early filers and others, this uptrend should be sustained in the near term and during post earnings season before the governorship election or after, due to price adjustment for dividend declared.
The buying sentiments across some major sectors of the market, except for consumer goods that witnessed selloffs on traders cashing out their profit may continue to support the rally as revealed in the short and medium-term trends which remain intact. Tuesday’s trading will give a clear direction as more companies release their scorecards, just as it may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the coming 2023 general elections.
Technically, the NGX index’s action had signal markup phase which support the bullish V-shape pattern that indicates reversal or continuation of trend on a daily and weekly time frame. Just as there is a divergence between the index action and MACD on a dally chart that supports uptrend, due to position taking in blue chip stocks. Let us keep our gaze on market forces and money flow.
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Oil price oscillation continued, as it pulled back to trade at $86.27 per barrel, on Russia plan output cut as a result of price cap and rising demand of Chinese as their economic recovery in the midst of rising attacked on Ukraine. Just as the geopolitical tension, high interest rate and inflation across the globe continue to threaten the world. Also, supply tightened due to the Russia-Ukraine war that has lingered so far. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, Monday/s trading started slightly in the upside and it was sustained throughout the session, on demand for Conoil, MRS, Vitafoam and others, despite profit taking, a situation that pushed the NGX’s index to an intraday high of 54,378.64 basis points from its lows of 54,327.30bps, before closing slightly above its opening figure at 54,364.67bps.
Market technicals were positive and mixed, with lower volume of trade, compared to the previous session in the midst of breadth favoring bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 73% buy position and 27% sell volume. The total transaction volume index stood at 0.47 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 83.19pts, from the previous day’s 79.96pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Monday trading, the NGX All Share Index inched up by 37.37 basis points, closing at 54,364.67bps, after opening at 54,327.30bps, representing a 0.07% up, just as market capitalization rose by N20.35bn closing at N29.61tr from the previous day’s N29.59tr, which also represented a 0.07% value gain.
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The session’s upturn was driven by accumulation in the shares of Conoil, MRS Oil, GSK, Vitafoam, Chapion, Wapco, CHI Plc and Chams among others, which impacted mildly on Year-To-Date gain to 6.08%. Market capitalization YTD gain increased at N1.78tr, representing 6.08% above its opening level for the year.

Bullish Sector Indices
Sectorial performance indexes for the session were in green, led by the NGX Energy which gained 0.98%. followed by Banking, Insurance, Industrial and consumer goods with 0.56%, 0.49%, 0.12% and 0.05% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 18:8, while transactions in volume and value were mixed, as market players transacted 140.84m shares worth N3.16bn. Volume was driven by trades in UBA, GTCO, Accesscorp, Zenith Bank and Chams.
The best performing stocks were Conoil and MRS Oil, after gaining 9.98% and 8.24% respectively, closing at N35.25 and N23.00per share respectively on market forces and impressive unaudited earnings. On the flip side, CWG and Fidelity Bank lost 9.18% and 2.87% respectively, closing at N0.89and N5.42per share, purely on selloffs and profit taking.

Market Outlook
We expect mixed sentiments and trend to continue on positioning and profit taking as portfolio rebalancing in the midst of impressive corporate earnings and expected inflation data, as rates fell further, amidst the release of more audited earnings and anxiety over the election uncertainty. Any pullback at this point may add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Crucial Announcement
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