Market Cap Soar By N1.4tr On Feb., As NGXASI Gains Balloon YTD Returns To 8.89%
Market Roundup for February
It was a bullish February on the Nigerian Exchange, as the key performance NGX All Share index extended its upbeat from January in the midst of increased buying and volatility, despite being the election month of 2023. The positive sentiment during the period was attributed to change in the holding structure of the market since foreign investors left the market in 2020 and local investors dominated with increased buying interest due to the better than expected corporate earnings post-Covid, higher payouts, mixed macroeconomic data and others. The market sustained its positive momentum and recovery ahead of more dividend declarations, or announcement by listed companies.
This coincided with the nation’s presidential election outcome and the ongoing geopolitical concerns over the war between Russia and Ukraine, which broke out on February 24, 2022, amidst the rising global inflation and rates hikes that are driving the mixed yields in the international and domestic fixed income market. In this regard, 91-day, 182-day and 364-day Treasury Bill rates inched up to 3%, 3.24% and 9.9% respectively in the last primary market auction. This has created buy opportunities for discerning investors and the technical traders, even as the market broke up the 55,000 psychological line during the month. The uptrend occurred on the back of position-taking and higher traded volume when compared to transactions recorded in January, as early filers continued to hit the market with impressive numbers and dividend news that translated to better yields.
During the month also, there were announcements of mixed economic data, ranging from the uptick in the January consumer price index, slowing expansion in Purchasing Managers’ Index at above 50 points, sustained GDP growth, showing that Q4 domestic productivity output was up by 3.53%, a situation expected to support stock prices. This is in addition to the oscillating oil prices in the international market, driven by improvements in the Chinese economy and the ongoing Ukraine-Russia war, propelling global oil stocks and domestic economic recovery.
In the midst of these also was the CBN Naira note redesign and cash crunch that is likely to impact the economy negatively in Q1 2023. Add this to the incidences of policy mismatch between the fiscal and monetary authorities, then you have a very unfriendly situation that threatens the ongoing economic recovery.
The seeming economic recovery and the rise of crude oil price above the nation’s $75 per barrel budget benchmark are positive signs for the equity market, going forward, despite the ongoing portfolio realignments, due to the ongoing rally and volatility, expected improvements in yields at the fixed income market and post-election rally.
With the expected influx of more audited earnings reports and high inflation in the new month, a mixed trend is underway as a result of profit taking and buying interests due to high dividend yields among blue-chips, as growth stocks become better and more attractive.
The composite index closed activities for the second month of the year on a positive note, as Tuesday’s market rally suggests a trend continuation, with the market yet to respond to the positive numbers as released due to liquidity challenges.
As noted earlier, the audited scorecards of various listed companies released so far have given insights into what we should expect from sectors and individual stocks. The possibility of an uptrend is high, amidst portfolio reshuffling on the strength of the 2022 full year numbers and corporate actions.
In the 20 trading sessions of February, the NGX All-Share index recorded gains in 13 sessions and was down in seven days, resulting in a 4.82% gain that pushed the NGXASI year-to-date to 8.89%. This happened as the market recorded a 16-year high, on post-pandemic shift in impressive company earnings performance, improving fundamentals, and high dividend yields that attracted more inflows to the equity space.
Specifically, during the month, the NGXASI rose by 2,567.59 basis points, closing at 55,806.26bps, after touching high of 55,819.51, from its lows of 53,234.31bps for the month, compared to the 53,238.67bps at which it opened, on high buying pressure. This impacted positively on the index and stock prices, pushing them up to breakout various resistance levels and psychological lines. Market capitalization rose by N1.40 trillion, closing at N30.401tr, from N28.988tr, representing a 4.84% appreciation in value. The month’s total ‘buy’ volume was 99%, extending the two-month bull transition, while volume index for the period was 0.96.
Transaction volume for the period was up by 36.55%, at 6.09bn shares, as against 4.46bn units recorded in the preceding month, just as market breadth for the month was positive with gainers outnumbering losers in the ratio of 55:32 to support the month up market as liquidity flows into equity assets as a result of factors mentioned above.
Bullish Sectorial Performance
Performance indexes across the sectors and market rose, except for the NGX Insurance index that closed the month lower by 0.59%. As shown by the chart below, the NGX Oil/Gas, Consumer goods, Premium, Pension, Banking and Industrial Goods indexes boosted the market the most during the month, more than the general market. The NGX Energy index gained a total of 15.97%, driven by position taking in the oil and energy stocks.
Others are represented in the chart below, revealing investors’ positive sentiment and buying interest among traders, as the market’s Price-To-Earnings Ratio is below 15x.
Best And Worst Performing Stocks For February
The best-performing stocks for the month under review were predominantly low, medium and large caps across the Insurance, Energy, Banking, Consumer goods, and others, led by Tripple Gee, which gained 149.52% as a result of the market sentiment, despite the lack of fundamentals to support the rallying prices. It was followed by MRS Oil’s 130.31% gain, and the 88.89% notch by International Energy Insurance. Conoil climbed 76.79% up, on market forces and seeming improvement in its earnings; just as Geregu Power chalked 72.19%; among others.
Best Performing Stocks in February
Source: Investdata Research
The worst performing stock was Japaul Gold, which lost 17.65%, amidst profit taking and market forces; followed by Chams’ 13.33% drop due to its unimpressive earnings. Ardova’s share price declined by a further 11.52% showing display of sell down for unimpressive earnings and plan to delist after buying off minority shareholders, while others are profit taking. Vitafoam and UACN lost 11.42% and 10.89% respectively.
Worst Performing Stocks in February
Source: Investdata Research
The NGX’s Index action for the month was bullish, extending the V-shape recovery trend, as the index rally to breakout some strong resistance levels of 54,290.84 points and 55,000 marks ahead of more audited financial reports. At the same time, it is trading above its shortest moving average, 20DMA, 50DMA and 200 DMA on the monthly time frame, to reveal strength and positive sentiments and above average traded volume.
The trading patterns and momentum, going forward, are likely to change as investors react to the expected audited full-year earnings news, portfolio rebalancing and repositioning, with dividend news and oil price oscillating.
Market technicals for the month were positive, a situation expected to be mixed in the new month, that is the peak of the earnings reporting season.
Mixed trend is expected to continue in the new month, even as the market outlook remains mixed and dicey due to the prevailing global trend, or pullbacks that may happen in the new month as a result of profit taking. The anticipated correction in the new month, or after, will strengthen recovery. Despite the high inflation, insecurity and post-election opportunities, as this impressive earnings and recovery oil prices will further boost market fundamentals.
But investors at this point should not be greedy. Instead, your decisions must be guided by investment goals and exit strategies, even as the healthy inflow of funds into the equity assets due to prevailing mixed rates in money market is likely to continued even as we look forward to MPC meeting in the new month.
Again, the current breakout of resistance level offers trader’s opportunities to position for the short term, while investors should target fundamentally sound, and dividend-paying stocks for possible dividend income and capital growth.
CRO|Investdata Consulting Ltd
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