Market Update for March 6
The seesaw movement on the Nigerian Exchange continued at the midweek with the benchmark All-Share index closing marginally lower on a less than average traded volume and negative market breadth. This halted the previous session’s gain in the midst of volatility and market players analyzing the 2021 corporate earnings performance ahead of the Q1 earnings expectations, while bargain hunters continue to take advantage of the recent pullbacks to position in undervalued stocks.
The mixed sentiments and momentum were attributed to buying interests and selloffs in blue chips that made the NGX index’s action trade flattish, despite the slight improvement in market liquidity as revealed by the money flow index, especially as fixed income market yield curve continues to expand. This is just as global and domestic cost-pushed inflation crisis continues to threaten economies around the globe. Analysts believe that the expected Q1 corporate scorecards will offer insights into what is to come for investors from the quoted companies in this pre-election year, especially given the level of uncertainties, so far.
Investdata Research’s mixed outlook for the month of April remains, as filing of first-quarter earnings reports in the midst of corporate actions of qualification, price adjustment, AGM, and payment of dividends by listed companies. However, there is need to watch the current trends, especially with bargain hunters still in the market cherry-picking fundamentally sound stocks. There is also the expected market reactions to the dividend announcements and numbers released in the hours leading to the end of March. We note, for example, that Thursday is the markdown date for MTNN’s dividend of N8.57 per share, as well as the annual general meeting and payment date for UBA Plc’s N0.80 dividends. These are likely to influence the market positively.
Investors have continued to watch the nation’s economic developments and what is happening in the fixed income market, with yields and rates staying mixed and flattish. Already, all eyes are on the plans by the Central Bank of Nigeria (CBN), as announced during the last Monetary Policy Committee (MPC) meeting to fulfill its promised intervention in the distribution of premium motor spirit and diesel. The aim is to ease the pains of the scarcity among manufacturers, SMEs, and households across the country, in the face of the epileptic power supply.
Despite, the slowdown at the close of midweek trading, investors and traders should watch their stop-loss and profit targets to adjust positions. Tentatively, the uptick in the fixed income market yields and oscillating rates of Treasury Bills may trigger the flow of funds into other assets.
The ongoing war in Ukraine, and the mixed sentiments are having effect on the market in recent times, just as investors continue to keep their gaze on the 2023 general elections, amidst uncertainty and the heightening insecurity in the country, following attacks here and there, especially the recent attack on an Abuja-Kaduna train with over 930 persons onboard in Kaduna.
The pullbacks as seen in the NGX index’s action during the earnings reporting season have created ‘buy’ signals for smart and discerning traders. However, we warn that market corrections are not over yet, hence the need to rely on your stop-loss effectively. This is because the oscillating trend signals that a major uptrend is underway, especially when it gets to the level where it is considered good enough for fixed income market players, among others, to jump back into equity positions.
Midweek’s candlestick formation reveals that sellers are having the upper hand, a trend that may lead to a continuation or reversal, depending on market forces as all eyes are on companies’ Q1 results. The NGX index’s action was flat, trading below its 20-day moving average, as volatility persists, just as the uptrend towards the next resistance level is sported around 46,846.16bps. Should the index break this point, the next visible level is 46,904,72 points.
Technically, the NGX index is making higher lows, as the session witnessed mixed sentiment that could be linked to the repositioning of portfolios ahead of Q1 numbers and reaction to corporate action dates. The possibility of the market sustaining this trend is a function of an inflow of impressive Q1 numbers and improved economic condition during this Q2, following which we advise investors to play defensive with sectors having strong demand and dividend stocks to reduce investment risks around the market.
Meanwhile, Wednesday’s trading opened slightly on the upside and oscillated for the rest of the session on buying interests and profit taking that pushed the NGX’s index to an intraday low of 46,751.63 basis points from its highs of 46,785.41bps, before sliding down to closing below its opening point at 46,766.16bps.
Market technicals were mixed and weak as volume traded was higher than the previous day, in the midst of breadth favoring bears on mixed sentiment as revealed by Investdata’s Sentiments Report showing 43% ‘buy’ volume and 57% ‘sell’ position. The total transaction volume index stood at 0.75 points, just as the impetus behind the day’s performance remained weak with Money Flow Index flat at 30.23pts, from the previous day’s 29.89pts, indicating that funds entered the market, despite the down market.
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Index and Market Caps
The NGXASI at the close of midweek’s trading slipped 11.21bps to close at 46,766.16bps, after opening at 46,777.37bps, representing a 0.02%drop, just as market capitalization similarly lost N6bn, closing at N25.21tr, from the previous day’s N25.22tr, which also represented a 0.02% value loss.
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Wednesday’s downturn was driven by selloffs and profit booking in GTCO, NB, UBA, NGX Group, Custodian Investment, Oando and Nascon, among others. This impacted positively on Year-To-Date gain, which reduced to 9.48%, while market capitalization growth stood at N2.39tr YTD, representing a 13.39% rise over the opening level for the year.
Mixed Sector Indices
Performance indexes across sectors were mixed, as the NGX Insurance, Banking and Energy closed 0.48%, 0.20% and 0.15% higher respectively, while NGX Consumer goods led the decliners after losing 0.22%.
Market breadth was negative, as decliners outnumbered advancers in the ratio of 18:16; just as transactions in volume and value terms were up, with stockbrokers crossing 261.59m shares worth N2.43bn. Volume was driven by trades in Fidelity Bank, Transcorp, GTCO, Accesscorp and Zenith Bank
Regency Insurance and Livestock Feeds were the best-performing stocks of the session, gaining 10% and 9.59% respectively, to close at N0.33 and N1.60 per share respectively on market sentiment and forces. On the flip side, NPF Microfinance and RT. Briscoe lost 9.78% and 8.93% respectively, closing at N2.03and N0.51per share, on selloffs.
We expect a mixed sentiment on bargain hunting as players digest the 2021 audited financials to reposition for Q1 2022 earnings expectation. This is expected to support an uptrend during this earnings season, amidst the oscillating oil prices, just as the market continues to interpret economic data in relationship with the crude 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 2021 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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