Mixed, Positive Sentiments May Linger As Investors Digest January CPI Data, Expect Earnings Inflow

Market Update for February 16

The bullish sentiment which started at the beginning of the week has been sustained on the Nigerian Exchange with Thursday’s session following through on increased buying interest that pushed the NGX All-Share index to close marginally higher on a low traded volume and positive breadth. This extended the bull transition on sideways movement for the fourth successive session as market players digest the latest consumer price index that jumped to 21.82% in the midst strong momentum and expectation of more 2022 audited financials.
All eyes are on the early filers Friday morning and next week to start hitting the market with their 2022 full year scorecards in the face of rising inflation and declining rates and yields in the fixed income market, as investors rebalance their portfolios to hedge against inflation will continue to favour some sectors and stocks with high dividend yields and strong earnings to support high payouts. This is especially true of banking stocks and others with strong fundamentals and earnings that supports higher payout or dividend growth at this session, even as the presidential and national assembly election draw closer.
A breakout of this ranging bullish performance are expected to be strengthened on the back of corporate actions, increased inflow funds in equity space and others in the near term and during post earnings season before the governorship election or after, due to price adjustment for dividend declared. Meanwhile, buying sentiments continue across some major sectors of the market, except for banking, industrial goods and energy that were hit with profit taking. The actual state of the audited earnings reports will give a clear direction, 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 chart and top patterns that signals reversal or continuation of trend on a daily and weekly time frame. Just as there is a bearish divergence between the index action and MACD on a dally chart that supports price correction, due to mixed sentiment in blue chip stocks. Let us keep our gaze on market forces and money flow.
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Oil price oscillation continued, pulling back to trade at $84.15 per barrel, as US influence on global oil prices increases and fear of rate hike by Fed 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, Thursday trading started slightly in the green, but oscillated for the rest of the session on buying interest and profit taking among all classes of stocks, a situation that pushed the NGXASI to an intraday high of 54,547.20 basis points from its lows of 54,506.43bps, before closing slightly above its opening figure at 54,520.20bps.
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 mixed sentiment as revealed by Investdata’s Sentiments Report showing 34% buy position and 66% sell volume. The total transaction volume index stood at 0.43 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 88.60pts, from the previous day’s 85.57pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Thursday’s trading, the NGX All-Share Index inched up by 12.54 basis points, closing at 54,520.20bps, after opening at 54,507.66bps, representing a 0.03% up, just as market capitalization rose by N6.30bn closing at N29.70tr from the previous day’s N29.69tr, which also represented a 0.03% value gain.

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Thursday’s upturn was driven by position taking in the shares of Geregu Power, Sterling Bank, Honeywell, Ikeja Hotel, Living Trust and Tripple Gee among others, which impacted mildly on Year-To-Date gain to 6.38%. Market capitalization YTD gain increased at N1.88tr, representing 6.38% above its opening level for the year.

Bearish Sector Indices
Sectorial performance indexes for the session were in red, except for NGX Consumer goods that closed 0.14% higher, which NGX Insurance led the decliners after losing 0.41%, followed by Industrial goods, Energy and Banking with 0.13%, 0,02% and 0.01% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 16:15, while activities in volume and value were down, as stockbrokers crossed 125.85m shares worth N3.60bn. Volume was driven by trades in GTCO, UBA, Zenith Bank, Transcorp and Dangote Cement.
Tripple Gee and Japaul were the best performing stocks after gaining 9.70% and 7.14% respectively, closing at N1.81 and N0.28per share respectively on market forces. On the flip side, Courtville Business Solution and Computer Warehouse Group lost 9.62% and 8.99% respectively, closing at N0.47 and N0.89per share, purely on profit taking.

Market Outlook
We expect mixed and positive sentiments to continue as market players digest January CPI data in the midst of corporate earnings expectation, portfolio rebalancing, falling rates 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
As the new year begins, you need to get started with activities that will help you in achieving your goals for the year. To this end, I must tell you that events and activities that happened in 2022 will shape 2023.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
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