Investors Seek Reduced Risk, Position In Dividend Stocks, As NGX Awaits Strong North, Or South Pull

Market Update for March 10

Thursday’s trading activities on the Nigerian Exchange closed positive on a low traded volume, extending the previous session’s positive outing, as the bulls resurfaced in the midst of continued volatility on buying interests in high-priced stocks that pushed the composite All-Share index up. This is coming at a time the market expects more companies to release their full-year 2021 audited accounts in the coming days.

The prevailing high dividend yields follows the sustained rebound and positive sentiment in the midst of the earnings season, with expectation of more earnings inflow, which has attracted bargain hunters taking advantage of the relatively low prices in the recent times. We must, however, warn that while the market correction is not over yet, the oscillating trend signals that a major uptrend is underway, especially when it gets to the level where it is good enough for fixed income market players, among others to jump into equity positions.  

Also on Thursday, the panic selloff in May & Baker and others, continued as the geopolitical tension in Eastern Europe lingers with significant risk on stocks and commodities’ trading, amid the rising cost of crude oil now fueling inflation capable of slowing down the global economic recovery and growth in 2022 and beyond. These may be reason investors remain cautious, despite the improved full-year performances as revealed in the numbers presented by many quoted companies so far to the NGX. The negative impact of the ongoing stand-off between Russia and Ukraine seems to be numbing positive reactions to these impressive corporate earnings.

The two session of bull transition after the NGX index had side trended as part of the distribution phase to remain above the 47,000 basis points support level, is a sign of volatility and uptrend towards the next breakout, sported around 47,613.72bps. Should the index break this point, the next visible resistance is far up at 48,000 points.

Note, therefore, that technically, the ongoing volatility is best described as a market looking for a strong direction to the north or south, even as the consistent uptrend could be linked to the sharp rally recorded in 2021, ahead of the full-year earnings season and Q1 numbers, coupled with positive economic indices. The possibility of the market sustaining this trend is a function of impressive numbers in an earnings season, following which we advise investors to play dividend stocks to reduce investment risk around the market.

Meanwhile, Thursday’s trading started slightly on the upside and oscillated on demand for bellwether stocks and profit-taking in medium and low-priced equities, pushing the NGX’s index to an intraday high of 47,383.77 basis points from its lows of 47,180.59bps, before closing above its opening point at 47,363.98bps on flat market breadth.

Market technicals were positive and mixed, with volume traded lower than previous the day’s in the midst of positive breadth on a high buying sentiment as revealed by Investdata’s Sentiments Report showing 90% ‘buy’ volume and 10% ‘sell’ position. Total transaction volume index stood at 0.81 points, just as energy behind the day’s performance remained strong with Money Flow Index looking down slightly at 64.00pts, from the previous day’s 64.61pts, indicating that some funds left the market.

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Index and Market Caps

At the close of Thursday’s trading, the benchmark NGXASI gained 76.89bps to close at 47,363.98bps, after opening at 47,287.09bps, representing a 0.16% rise. Similarly, market capitalization rose by N41bn, closing at N25.53tr, from previous day’s N25.52tr, which also represented 0.16% gain.

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The day’s upturn was driven by accumulation in Presco, MTNN, Oando, NB, Zenith Bank, Access Bank, Okomu Oil, and Fidelity Bank, among others. This impacted positively on Year-To-Date gain, increased to 10.88%. Market capitalization growth stood at N2.80tr YTD, representing a 14.89% rise over the opening level for the year.

Bullish Sector Indices

Performance indexes across sectors were up, except for the NGX Consumer Goods that closed 0.56% lower, while the NGX Energy index led the advancers, after gaining 1.21%, followed by Insurance and Banking with 0.88% and 0.37% respectively.

Market breadth was slightly positive, as gainers outnumbered losers in the ratio of 21:20; just as activities in volume and value terms recorded a decline, while investors exchanged 261.56m shares worth N4.48bn. Volume was driven by trades in Cutix, Access Bank, FCMB, Fidelity Bank, and Zenith Bank

RT Briscoe and UACN were the best-performing stocks, after gaining 9.84% each, closing at N0.67 and N10.05 per share respectively on market forces. On the flip side, Royal Exchange and ABC Transport lost 9.46% and 8.57% respectively, closing at N1.34 and N0.32 per share, on selloffs.

Market Outlook

We expect the positive sentiment and bull transition to continue on reaction to corporate actions and earnings, in expectation of more release of 2021 audited financials with dividend announcement to boost positive vibes during this earnings season and rallying oil prices. Also, the market continues to interpret the positive economic data in relationship with 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 the inflation rate moderates at 15.60% and 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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