Mixed Sentiments, Amid Earnings, Dividend Inflow, Inflation Data, MPC Outcome

Market Update for the Week Ended March 11 and Outlook for Mar 14-18

The Nigerian equity market rebounded last week in the midst of continued volatility and renewed buying interests in blue chips as panic selloffs moderated on expectation of more 2021 audited financials. This was even as many of those companies that released their unaudited accounts in January started notifying the exchange of board meeting for final approval of their 2021 year-end corporate actions.

With the lingering conflict in Eastern Europe remaining a source of significant risk to trading and investing in global stocks and commodities markets, Investdata believes that it could be suicidal at this time for any trader or investor to joke with his/her stop loss, while executing trade plans. One thing in stock market that is consistent is change, and over the past two weeks we have seen how the global trend has influenced our market negatively, despite the impressive corporate earnings at the peak of earnings reporting season, despite the outpouring of seemingly impressive numbers. Consequently, trading strategies must change if you must stay ahead of the market and in profit at a time like this, while protecting your trading capital, or investable fund.

A volatile market as we are witnessing today requires proper technical analysis tools for timing your trades to avoid exposing your funds to avoidable risk. Your investment time frame should determine the multiple time frame or chart you should use when charting to take a decision.  Long-term investing should focus more from monthly chart to weekly and daily. Medium Term investing should also look at the weekly chart and daily time frame, while short term trading considers daily and minutes chart. 

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As the bull resurfaced during the week, the share prices of Presco, Cornerstone, and FCMB, among others, hit new 52-week highs.

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Movement Of NGXASI

It was a mixed market of two trading sessions of down market and three days up that reversed the previous negative outing, after opening the week on a negative note, losing 0.08%, which was extension of the previous Friday’s selloffs, it lingered until Tuesday when the index fell by another 0.16%. The trend was halted by the midweek when the market gained 0.26% on renewed buying interests across the sectors, a trend that continued on Thursday and Friday when the index gained 0.14% and 0.16% respectively. This brought the week’s total gain to 0.36%, compared to the previous week’s loss of 0.13%.

Consequently, the benchmark index recorded a 168.87 basis points gain, closing the week at 47,437.48bps, after touching an intra-week high of 47,482.73 points, and a low of 47,122.34bps. Recall that the week opened with the index at 47,268.61bps. During the period also, market capitalisation rose by N91bn, closing at N25.67tr, from the previous week’s N25.48tr, which also represented a 0.36% appreciation in value. 

The top advancers table for the week was dominated by medium and low cap stocks, as fundamental news and dividend expectations continue to drive demand for stocks, as traders and investors take advantage of the ongoing correction to buy into the better-than-expected numbers that hit the market. There were also mixed signals that indicates that the market’s bottom is around the corner ahead of quarter-end window dressing and portfolio repositioning for Q1 2022 numbers draw nearer, just as all eyes are set on the outcome of the next MPC meeting holding in a fortnight. The voting pattern at the next MPC meeting will definitely take cognizance of the impacts of global happenings that has resulted in rising commodity prices, as they relate to the increasing pressure on inflation across the world. Investors in Nigeria will also be looking forward to the country’s February Consumer Price Index in the new week, in the wake of the increased cost of petrol, diesel and the government’s unannounced removal of subsidy on electricity.    

We note that the NGX Index and price actions reveal positive sentiments, a situation that was reflected in major sectoral indexes that closed higher, due to gains recorded by Presco, UACN, NGX Group, NB, Zenith Bank, MTNN, and others that pushed the index higher on a high traded volume.

Market breadth for the week turned positive due to position-taking ahead of corporate actions, leaving investors pleasantly surprised, even as the released numbers have so far given insights into what is expected in terms of dividends. This is likely to support the recovery in the short to long run, while investors increase their positions in the hope of higher dividend payouts and yields.

During the week, gainers outnumbered losers in the ratio of 36:33 on buying sentiments, as revealed by the investor sentiment report showing 87% ‘buy’ volume and 13% sell position. Money Flow Index, however, declined to 69.26bps from the previous week’s 74.51 points, an indication that funds left the market despite the market closing higher.  

The NGX’s index action sustained its strong bull-run technically on a daily and weekly chart, despite the divergence between index action and money flow index, which equally supported the week’s rebound on a high volume traded, as the NGXASI continues to trade above the 47,000 points to test 47,482.72 basis points. The candlestick formation, at the end of the week, revealed buyers are in charge at a time the release of more 2021 audited financials continues to give direction. The candlestick pattern indicates a possible continuation of the trend, depending on market forces in the new week. Meanwhile, market recovery is still strong. Also, all eyes are on fixed income market yields and oil prices to further support market fundamentals and attract liquidity to the equity space. The NGX at this point is creating new buying opportunities for dividend income investors.

Mixed Sectoral Indices

The sectorial performance indexes for the week were mixed, as the NGX Oil/Gas, Consumer and Industrial Goods closed 2.22%, 0.52% and 0.13% lower respectively while the NGX Insurance led the advancers after gaining 2.65%, followed by Banking with 1.29%.

Transaction in volume and value terms were higher as investors exchanged 2.80bn shares worth N23.86bn, compared to the previous week’s 1.37bn units valued at N23.79bn. This volume was driven by Financial Services, Conglomerates and Consumer goods industry stocks, FCMB, Unity Bank, FBN Holdings, Transcorp and Zenith Bank

Presco and RT Birscoe were the best-performing stocks for the week, gaining 19.62% and 15.87% respectively, closing at N125 and N0.73per share respectively on corporate action expectation and market forces. On the flip side, Ellah Lakes and May/Baker lost 18.54% and 18.35% respectively, at N3.12 and N4.45 per share, purely on selloffs and profit-taking.

Outlook for the week

We expect a mixed sentiments to continue in the new week, as more dividend announcements and audited earnings reports hit the market, in the midst of the positive momentum and expectation inflation report from NBS ahead of MPC meeting slated for March 21 and 22, 2022, as investors and traders react to numbers and expected dividend declaration. We note that income investors continue buying into dividend-paying stocks,

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