Update for March 7
Profit booking continued on the Nigerian Exchange Monday, but on a decreasing momentum, as the week opened marginally lower amid lingering concerns over the conflict in Eastern Europe, with the composite index NGX All-Share Index slipping further on a low traded volume and positive market breadth. This extended the bearish sentiment for the fourth consecutive session in the midst of high payouts and expectations of more 2021 financials flooding the market.
There is palpable fear over the implications of the continued crisis between Ukraine and Russia, at a time the global economy is yet to recover fully from the telling effects of the COVID-19 pandemic, while many central banks across the world are facing challenges on the monetary policy front, particularly as regards inflation and interest rates. One major impact is the rallying oil prices, as another inflationary pressure source, especially here in Nigeria, in addition to the insecurity challenges the country has faced since 2009, which has kept many farmers at home, sending food prices northward. The inflationary pressure and food crisis is made worse by the rising cost of transportation, and fuel scarcity.
The truth is that the Nigerian equity market is not smiling at all, as profit-taking and selloffs persist across major sectors, especially blue-chip stocks, despite the impressive numbers emanating from quoted companies. The low traded volume in the midst of negative breadth and mixed sentiment, however, is an indication that many investors are still waiting to see the earnings and corporate actions of companies that are yet to release their numbers.
Despite the recent impressive scorecards and payouts from Dangote Cement, Seplat, UBA, and others, the market has reacted negatively amidst sustained profit-taking, seemingly ignoring the numbers or payout as players run for safety, while keenly observing developments in the political space ahead of next year’s general elections.
Meanwhile, the ongoing geopolitical tension continues to trigger the rise in commodity prices, with Brent crude trading above $130.50 per barrel at the international market, pushing oil and energy stocks higher, while exerting more pressure in inflation rate across on the globe However, oil prices rally is expected to support economic and market fundamentals, as crude oil prices hit new highs.
The trading patterns in the midst of corporate actions and the better-than-expected numbers call for caution, as the NGX index action pulled back, touching 47,301 basis points on a low volume to trade above the 47,000 mark, ahead of more 2021 full-year audited results.
As we expect market volatility to continue in the midst of an earnings reporting season, this would offer opportunities for the ‘buy’ and ‘sell’ sides of the market, but it is more important than ever to get good clear, and concise information to help firm up your trading and investing plans as the market awaits more big names to release their corporate earnings and actions as a push for positive reversal.
With all these in mind, I want to personally invite you to join me live today at Investdata Trading Academy with Ambrose every trading day at noon to get the real live position of the market and direction of individual stocks on exchange. This is necessary to help you make investment decisions at any point. Here, we advise you either as investors and traders to allow their stop-loss and profit targets guide you, while removing every atom of emotion.
Technically, the NGX’s index action remains bullish in the face of buying interests and profit-taking in low, medium, and high cap stocks to signal a change in momentum and trend as the index and indicators are mixed, looking in the same direction on a light traded volume. Investors need to watch this, as funds are entering the market as expected, while traders should take advantage of any pullback at this point to a position.
Trade metrics for the session revealed profit-taking and positioning, as the NGX index trades above the 20, 50, and 200-Day Moving Average, while other indicators are mixed as the ADX slowed down to 62.27. The RSI closed above 50 but declined to 67.10 from 69.48, and Money Flow Index inched up to 74.32 points on the daily time frame. The continuation of this trend depends largely on the interplay of market forces and flow of funds, as the direction of the fixed income market yields remains unclear with TB rates declining further.
Monday’s trading started on the upside and was sustained before oscillating on selloffs and buying interests, a situation that pushed the NGX index to an intraday low of 47,260.61 basis points, from its highs of 47,301.54ps, and thereafter closed below its opening point at 47,268.61bps.
Market technicals were positive and mixed, as volume traded was lower than in the previous day in the midst of positive breadth and mixed sentiments as revealed by Investdata’s Sentiment Report showing a 46% ‘buy’ volume and 54% ‘sell’ positions. The total transaction volume index stood at 0.79 points, just as the energy behind the day’s performance remained relatively strong. Money Flow Index was up at 69.32 points, from the previous day’s 68.28 points, indicating funds entered the market slightly despite the down market.
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Index and Mkt Cap Movement
The benchmark NGXASI, at the close of the day’s trading, lost 6.00 basis points at 47,262.61bps, after opening at 47,268.612bps, representing a 0.01% drop, just as market capitalization fell by N3bn, closing at N25.47tr, from the opening value of N25.47tr, also representing a 0.01% value loss.
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Meanwhile, Monday’s downturn was driven by selloffs and profit-taking in Seplat, Julius Berger, UBN, UACN, NASCON, Unilver, and Africa Prudential, among others. This impacted mildly on Year-To-Date gain, as it reduced to 10.64%. Market capitalization growth stood at N2.76tr YTD, representing a 14.53% rise over the opening level for the year.
Bearish Sector Indices
All the sectorial performance indexes were down, led by the NGX Oil/Gas after losing 1.42%, followed by Consumer Goods, Banking, Energy, and industrial goods with 0.69%, 0.56%, 0.14%, and 0.03% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 19:17, while transactions in volume and value terms were mixed, after investors exchanged 179.33 m shares worth N2.86bn, compared to the previous day’s 279.95m units valued at N4.16bn. Volume was boosted by trades in Jaiz Bank, Access Bank, UBA, Transcorp, and GTCO.
Cornerstone Insurance and Wapic Insurance were the best-performing stocks for the day, gaining 9.38% and 8.70% respectively, closing at N0.70 and N0.50 per share on market sentiment and forces. On the flip side, RT Niger Insurance and Regency Insurance lost 8.70% and 7.14%, closing at N0.21 and N0.39 per share, on profit taking and selloffs.
We expect the mixed sentiment to continue on panic selling, while investors react to corporate action 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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