Mixed Sentiments May Linger, Ahead Of Governorship, State Assembly Polls, Yield Uptick, Earnings Inflow

Market Update for the Week Ended March 3 and Outlook for March 6-10

Post the presidential election week, the Nigeria’s stock market sustained its bullish transition on an increasing accumulation of dividend paying stocks and large cap companies that announced their dividend payout during the period. For now, all eyes are on companies that notified the exchange of board meetings to approve their audited financials and dividend for 2022.
With the aggrieved parties heading to tribunal, the post-election fear has significantly reduced, ahead of the governorship and State Houses of Assembly elections holding this Saturday, as we expect market players to remain active, waiting for the release of more corporate earnings and actions, which are expected to drive market performance mixed trend for the rest of the month. We expect that dividend adjustment and payment announcements will pile pressure on the benchmark NGX All-Share Index, and in the process attract more investors into selected equities at lower prices, while market’s Price-to-Earnings ratio remain relatively low and attract investment, on this note we foresee a positive trend in the market for Q2.
Despite the recent mixed macroeconomic data from the National Bureau of Statistics (NBS) that indicated growth of 3.52% in the last Q4 2022 GDP and purchasing managers index (PMI) recorded a contraction of 44.7 points below 50 points according to Stanbic IBTC reports. The performance of listed companies on the exchange has been impressive in the face of global and domestic headwinds that however revealed opportunities for discerning investors in sectors that supported the national growth and are likely to benefit from what had happened in the economy, as all eyes are on the expected economic reforms from incoming government in May 2023.
It is obvious that every investment is against future expectations and market direction, activities in the period under review was largely driven by early filers’ corporate earnings and actions made available to the market, especially from Dangote Sugar, Nascon, Dangote Cement, Lafarge Africa, Nestle Nigeria, Transcorp Hotel, Ucap and Africa Prudential, which impacted the market as investors reacted to results and dividend declared. We expect that peace and security after all these elections will boost confidence and attract more players to the market, and that the incoming administration would reset the economy and political landscaped using reforms that meet the aspiration and enhances the living standard of the Nigerian people.
The mixed sentiment and portfolio repositioning in the midst of the uptick in fixed income market rates and yields after the NTB auction offer rates suffered a decline for the fifth consecutive week suggests a disconnection from the Monetary Policy Rate of 17.5%. Also, the latest inflation data shows a resurgence to its 17-year high of 21.82% in January, compared to 21.34% recorded in December 2022.
The NGX Index’s action broke out the psychological line of 55,000 and resistance levels of 55,407.84 points to test almost 56,000 mark after touching 55,985.47 basis points to trade above 55,000 points on a mixed technicals and positive market breadth as more equities appreciated in price across low, medium and high cap stocks that supported uptrend and form a toping chart pattern that support reversal and continuation of trend depending market forces in the new week, as more audited earnings are expected to hit the market in coming days and weeks. We note also that a material change in rates and price behaviour may support a further uptrend, even as technical tools are revealing the last minute price markup by smart money or institution investors. So, let waits for confirmation as Monday trading opens being another election week.
The mixed sentiment across the major sectors and other indexes of the market supported the uptrend as medium and long-term trends are still intact, but this week trading will give a clear direction as more companies release their scorecards and react positively as these numbers offer insights into what investors should expect as dividend from the companies. This may signal the continuation of this recovery in the quarter, notwithstanding uncertainties associated with the elections, and the possibility of a post-election rally, if every things goes well.
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Oil price during the week continued its oscillation, as it rebounded to trade at $86.44 per barrel as Saudi Aramco hikes oil prices once again in the midst UAE considering leaving OPEC. Just as recovery in China economy and strong dollar could trigger recession in the midst rate hike in US and others climates due to inflation uptick across the globe. We note also the geopolitical tensions and supply tightening due to the Russia-Ukraine war which has lingered for almost a year and escalating, having broken out on February 24, 2022. The up and down movement of oil price also continues to drive volatility across the globe.

Movement Of NGXASI
The NGX had a mixed week of positive outing as the key performance NGX All-Share index recorded two days of down market and three sessions of up market, owing to position taking in highly priced stocks and blue-chips that just declared dividend for its shareholders. This pushed the index toward the 56,000 level to 55,985.47 basis points on a mixed sentiment, ahead of more corporate actions that now make the market attractive for dividend income investors.
Trading for the week opened on a positive note, extending the gain recorded in the previous session as index gained 0.69%, a trend that was sustained on Tuesday when the market moved further northward with 0.86%, but retraced down by 0.53% at midweek’s session, a situation that was halted on Thursday with gain of 30%, and then pulled back on Friday by 0.23%. This brought the week’s total gain to 1.06%, in addition to the previous week’s 2.13% positive position.
Consequently, the benchmark NGX All-Share Index gained 580.00 basis points, closing at 55,529.21bps, compared to the week’s 54,949.21 points opening level, after touching an intra-week high of 55,984.47bps, from its lows of 54,941.76points. Similarly, market capitalisation rose by N316bn, also representing a 1.06% appreciation in value at N30.25tr, from the previous week’s N29.93tr,
The top advancers’ table for the period was dominated by low, medium and high cap stocks amid buying sentiments and position taking in dividend paying companies as volatility and portfolio repositioning continued. Also notable is the fact that market players were accumulating positions after seeing the unaudited results from different sectors ahead of their corporate actions. So buying into value, strong earnings and high dividend yield companies continued, as the market’s recovery persisted, heading for 56,000 and 56,118.81 levels.
Market technicals revealed a positive breadth as advancers outnumbered decliners in the ratio of 53:21 on a mixed sentiment as indicated by investdata sentiment report showing 56% ‘buy’ volume and 44% sell position. Money Flow Index looking up to 90.47bps, from the previous week’s 90.20points, an indication that funds entered the market on a weekly chart to reflect buying interest in some stocks and major sectors of the market, despite election risk and uptick in fixed income market yields.
The NGX index’s action maintained its bullish rally, despite uncertainties regarding the election and profit taking ahead of a major resistance level of 56,000 mark and more financials, as market players look forward to a financial market, economic and political reset that will drive higher returns in 2023 and beyond. Just as the ‘V’ shape chart pattern on a weekly time frame, indicates continuation of trend or reversal due to profit taking and extreme volatility.
Position taking remained dominant as the index traded above the T-line and other moving averages like 100, and 200, even forming a topping chart at different levels of its recovery move from 43,418.26 that signaled reversal or continuation of trend, depending on market forces, as all eyes are on 2022 financials that will give direction as trading opens on Monday. We note that the volume which supported this recovery and rally remains mixed and above the market’s traded average, just as corporate actions and others could support the uptrend further into early March

Bullish Sectoral Indices
Sectorial performance indexes for the week closed higher, except for the NGX Oil & Gas that closed lower by 2.36, while the NGX Consumer goods led the advancers’ after gaining 5.56%, followed by Industrial goods, Banking and Insurance with 1.40%, 1.06% and 0.86% respectively.
Activities in volume and value were mixed, after investors exchanged 1.91bn shares worth N18.44bn, compared to the previous week’s 799.85m units valued at N29.35bn. Volume was driven by ICT, Financial Services and Service, led by Chams, Capital Hotel, Transcorp, GTCO and Sterling Bank.
Geregu Power and C & I Leasing were the best-performing stocks during the week, gaining 27.45% and 20.61% respectively, closing at N325.00 and N3.98per share on market forces and sentiment. On the flip side, Chams and Multiverse had 10.71%and 10% respectively, at N0.25 and N3.96 per share, purely on profit taking.

Outlook for the week
We expect a mixed trends and sentiments to continue as investors awaits governorship election outcome and uptick in rates and yields in fixed income as more companies’ earnings reports are expected to roll in this week. The market index is already eyeing the 56,000 psychological level in weeks to come. However, retracement to the 53,578.12 level and below is possible on profit taking as global and domestic events unfold.

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