Mixed Trend On NGX, Ahead Of Easter Holidays, Positioning For 2022Q1 Financials

Market Update for March 13

Nigeria equities closed higher at the midweek, as the market continued its bull run on bargain hunting in blue-chip and large-cap stocks, sustaining a positive sentiment as other financial services stocks like United Capital and Infinity Trust Mortgage Bank released their Q1 numbers, kicking off the Q1 corporate earnings reporting season with impressive performance.

The upswing was despite the day’s Treasury Bills primary auction by the Central Bank of Nigeria (CBN) in the midst of oscillating rates and flattish yields in the fixed income market. The high volume traded during the session also indicates an increase in buying momentum and position-taking ahead of more scorecards hitting the market before and after the Easter holidays to support the ongoing rallying.  

The NGX All-Share index sustained its positive outing for the four consecutive session, also on a positive market breadth to remain in the markup phase, as smart money makes effort to move prices higher. This suggests that funds are entering the equity space as players move to hedge against soaring inflation.

Trading patterns and buying sentiments in the market confirmed the return of bulls, as the NGX All-Share index action broke out the 47,231.66 points to continue its recovery momentum. It is also indicating the possibility of trend continuation as bargain hunters repositioned in fundamentally sound stocks and sectors with positive news that will support growth in Q2 and for the rest of the year despite the uncertainty that comes with the pre-election year.

Investdata Research’s mixed outlook for the month of April and the quarter remains, as the filing of first-quarter earnings reports kicked off in the midst of corporate actions, qualification, price adjustment, AGM, and payment of dividends by listed companies. However, there is a need to watch the current trends, especially with bargain hunters still in the market cherry-picking fundamentally sound stocks. There are also the expected market reactions to the dividend markdown and payment dates of the companies on the exchange. We note that tomorrow is the qualification date for FCMB’s dividend of 20 kobo per share, while Stanbic IBTC Holdings’ price will be adjusted for its N2.00 dividend.  These are likely to influence the market positively or otherwise. 

Market players continue to watch the nation’s economic developments and what is happening in the fixed income market with yields and rates. Already, all eyes are on plans announced by the CBN 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 bull rampage, investors and traders should watch their stop-loss and profit targets to adjust positions and take profit as their target is met. Tentatively, the marginal uptick in the fixed income market yields and oscillating rates of TBs may support the flow of funds into other assets.

The Eastern European crisis and subsiding cases of COVID-19 in China, resulting in gradual reopening after the lockdown in some provinces have continued to influence commodities prices, especially crude oil which rebounded in the international market to trade above $105 per barrel, after touching $120.27 in the previous days. This has continued to push production costs up, worsening inflationary pressure across the globe and weakening economic outlooks for 2022 and 2023, thereby influencing the monetary policy of central banks as they move to checkmate the impacts of the Russia-Ukraine conflict on the global economy to avoid a global recession.

The uptrend as seen in the NGX index’s action in recent times ahead of the earnings reporting season has created ‘buy’ signals for smart and discerning traders. However, we warn that market corrections are not over yet because profit taking is part of the market dynamics, hence the need to rely on your stop-loss effectively. This is because the uptrend signals that profit-taking is underway, especially when it gets to the level where it pulls back.   

The candlestick formation at the end of trading reveals that buyers are in charge, 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 broke out another major resistance level of 47,000 basis points, trading above its 20-day moving average, as volatility persists and the uptrend towards the next resistance level is sported around 47.465.17bps. Should the index break this point, the next visible level is 47,613.72 points.

Technically, the NGX index is making a higher high, as the session witnessed strong positive 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 the state of 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.

Midweek’s trading started on the upside and it was sustained for the rest of the session on buying interests and profit-taking, a situation that pushed the NGX’s index to an intraday high of 47,388.15 basis points from its lows of 47,188.10bps, before closing above its opening point at 47,367.31bps.

Market technicals were positive and strong as volume traded was higher than the previous day, in the midst of breadth favoring the bulls on buying sentiment as revealed by Investdata’s Sentiments Report showing 90% ‘buy’ volume and 10% ‘sell’ position. The total transaction volume index stood at 1.16 points, just as the energy behind the day’s performance remained relatively strong with Money Flow Index looking up at 58.27pts, from the previous day’s 49.43pts, indicating that funds entered the market.  

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Index and Market Caps

At the end of Wednesday, the composite NGX index gained 162.87bps to close at 47,388.15bps, after opening at 47,205.03bps, representing a 0.34% growth. Similarly, market capitalisation rose by N87bn, closing at N25.54tr, from the previous day’s N25.45tr, which also represented a 0.34% value gain.

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Midweek’s upturn was driven by buying interests in MTN Nigeria, Okomu Oil, GTCO, UBA, Accesscorp, ETI, UACN, UBN, Julius Berger, and GSK, among others. This impacted positively on Year-To-Date gain, which increased to 10.89%. Market capitalization growth stood at N2.69tr YTD, representing a 14.97% rise over the opening level for the year.

Bullish Sector Indices

Performance indexes across sectors were bullish, except for the NGX Insurance which closed 0.18% lower, while NGX Banking led the advancers after gaining 0.56%, followed by Consumer goods and Energy with 0.03% and 0.03% respectively.

Market breadth was positive, as gainers outnumbered losers in the ratio of 31:16; just as transactions in volume and value terms were up, as stockbrokers crossed 391.89m shares worth N9.95bn. Volume was driven by trades in GTCO, Zenith Bank, UBA, Fidelity Bank, and MTNN.

The best-performing stocks were Meyer and Ikeja Hotel after gaining 9.56% and 9.24% respectively, closing at N1.49 and N1.30 per share respectively on market forces and earnings expectation. On the flip side, Sunu Assurance and Sterling Bank lost 7.69% and 6% respectively, closing at N0.36and N1.41 per share, on profit-taking.

Market Outlook

We expect a mixed trend, being the last trading session before the long Easter holidays, with profit-taking underway, amid repositioning as market players digest 2021 audited financials and revaluation of quoted companies ahead of Q1 2022 earnings expectation. This is expected to support this uptrend during this earnings season, amidst the rebound of 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, while the International Monetary Fund is calling for a hike in the interest rates and further devaluation of the Naira.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdataonline.com

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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