Investors, Traders Activate Caution Mode, As Deadline For Dec. Year-End Results Beckons

Market Update for March 23

Volatility on the Nigerian Exchange continued at the midweek as the key performance index that measures activities closed marginally higher on a low traded volume and flat market breadth to resist further decline. The market, thereby, halted four consecutive sessions of bear transition on bargain hunting activities across the sectors and blue chips stocks that had suffered losses recently on profit-taking and selloffs.

Market players continue to keenly observe the nation’s economic development, expecting the recent outcome of the Central Bank of Nigeria’s Monetary Policy Committee (MPC) to influence the flow of funds into and impact the financial markets. Stakeholders are, however, anxiously awaiting the plans by the CBN to intervene in the petrol products sector, which as announced is targeted at making premium motor spirit and diesel available, thereby easing the pain of manufacturers, SMEs and households across the country, in the face of the epileptic power supply.

There is a noticeable increase in the rate at which listed companies are giving notice of their closed periods and board meetings to consider their Q1 2022 financials, ahead of the March 31, 2022 deadline for the submission of audited reports for the 2021 year-ended December 31. We note the renewed buying interests, as bargain hunters take advantage of the pullbacks to position in expectation of dividend qualification dates, and the end-of-quarter window dressing by fund managers.

There was improved sentiment and buying interests at the midweek’s session, despite the low volume traded, as investors increased their positioning in banking, industrial Goods and petroleum marketing stocks for dividend expectation. Tentatively, the continued mixed direction of fixed income market yields and declining rates of Treasury Bills may trigger flow of more funds to the equity space, despite the prevailing mixed trend and sentiment in the stock market amidst the ongoing war in Ukraine, and panic selloffs that have affect the market in recent times.

The rebound in oil prices which rallied to above $120 per barrel at the international market is pushing production cost up, heightening inflationary pressure across the globe and weak economic outlook, thereby influencing the monetary policy of central banks as they move to checkmate impacts of the Russia-Ukraine conflict on the global economy to avoid global recession. The recent uptick in domestic inflation is a potent threat to the fixed income market and investment yields, which should be an indication that funds may likely flow into the equity space as institutional investors balance their portfolios ahead of the new quarter in expectation of Q1 2022 corporate earnings and economic data.  

The slight rebound recorded on Wednesday in the face of the earnings reporting season has created ‘buy’ signal for smart and discerning traders. However, we warn that market consolidation and corrections are not over yet, hence the need to rely on your stop loss effectively, as 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 back into equity positions.  

The candlestick formation and buying sentiments as at close of midweek’s trading reveals a likely continuation of trends, or reversal, depending on market forces as trading opens Thursday. The NGX index’s action resisted decline to remain in the distribution phase, trading below its 20-day moving average. The benchmark index remains strong and within the 47,000 basis points region which is the strong support level, as volatility persists and uptrend towards the next breakout is sported around 47,204.34bps. Should the index break this point, the next visible resistance is 47,282.68 points.

Technically, the NGX index rebounded in a consolidation range, even as the session’s buying interest could be linked to position-taking across the major sectors that pulled back recently. The possibility of the market sustaining this trend is a function of impressive numbers and improved economic condition during this earnings season, following which we advise investors to play dividend stocks to reduce investment risks around the market.

Meanwhile, Wednesday’s trading opened on the downside and oscillated on selloffs and buying interests in blue-chips, before rebounding to pushed the NGX’s index to an intraday high of 47,167.97 basis points from its lows of 47,132.62bps, before closing slightly above its opening point at 47,163.94bps.

Market technicals were mixed as volume traded was lower than the previous day’s as breadth was at par on a buying sentiment as revealed by Investdata’s Sentiments Report showing 89% ‘buy’ volume and 11% ‘sell’ position. Total transaction volume index stood at 0.72 points, just as the energy behind the day’s performance remained strong with Money Flow Index looking flattish at 57.40pts, from the previous day’s 57.62pts, indicating that funds left the market slightly.

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Index and Market Caps

The benchmark index NGXASI, at the end of midweek inched up 7.38bps to close at 47,163.94bps, after opening at 47,156.37bps, representing a 0.02%up. Similarly, market capitalization rose marginally by N3.98bn, closing at N25.42tr, from the previous day’s N25.41tr, which also represented a 0.02% value gain.

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Midweek upturn was driven by accumulation in stocks like CAP, Learn Africa, Wapco, Conoil, Access Bank, United Capital, Champion, NPF Micrinance and Fidson, among others. This impacted mildly on Year-To-Date gain, which inched up to 10.41%. Market capitalization growth stood at N2.74tr YTD, representing a 14.21% rise over the opening level for the year.

Bullish Sector Indices

Performance indexes across sectors were in green, except for NGX Insurance that closed lower with 0.19%, while NGX Banking led the advancers after gaming 0.25%, followed by Energy and industrial goods with 0.11% and 0.08% respectively. while NGX Consumer Goods closed flat.

Market breadth was flat, as losers were equal to gainers in the ratio of 16:16; just as activities in volume and value terms were down, as investors exchanged 267.48m shares worth N3.22bn. Volume was driven by trades in Fidelity Bank, Access Bank, UBA, GTCO and Zenith Bank.

Chemical Allied Products and Learn Africa were the best-performing stocks for the session, gaining 10% and 9.50%, closing at N19.80 and N2.17per share respectively on impressive payout and market expectations. On the flip side, FCMB and Mutual Benefits Assurance lost 8.72% and 7.41% respectively, closing at N3.35 and N0.25 per share, on profit taking and selloffs.

Market Outlook

We expect sustained improved sentiments on higher dividend yields, as bargain hunters take advantage of the pullbacks to position as investors digest the inflation data, ahead of the inflow of more release of 2021 audited financials with dividend announcements to support uptrend during this earnings season and 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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CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467