Market Update for March 14
The bear transition on the Nigerian Exchange continued Tuesday as the ranging market and consolidation persisted ahead of macroeconomic data, especially the Monetary Policy Rate which will be reviewed at next week’s meeting of the Central Bank of Nigeria (CBN) and the inflation rates for February from the National Bureau of Statistics (NBS), in addition to the TB primary market auction rate. There is also Saturday’s governorship and state houses of assembly elections in the face of earnings expectations, qualification dates for dividends and price adjustments for dividends announced before the Annual General Meetings where the shareholders will approve for payment.
The benchmark NGX All-Share index moved southward on price declines in selected stocks that weighed on the index on an above average traded volume and negative market breadth which extended the bear run for the third consecutive days. There is also the fear of a contagion following the Silicon Valley Bank collapse across the globe. Yes, it is obvious that the central banks of the world’s consistent rates hike had contributed to what happened to SVB, but did not reveal a systemic problem at all, because the bank was a unique institutions. It banked venture capital firms and their portfolio companies, a home grown tool to enable such firms lever their investor capital. Most importantly, it had the highest percentage of uninsured deposits at 97%, which made its depositors most vulnerable to a bank failure.
Despite the market pulling back, there were position taking in the face of mixed sentiments, as more companies continued to notified the exchange of their board meetings to approve audited result and recommend dividend for the period, after the unaudited accounts have given investors an insight into what will likely be released as dividend, following which such results should hit the market any moment before the month end.
With the election season gradually winding down this weekend, it is expected that political uncertainties and fear will reduce, since the continuity that supports investment inflow is being built in the midst of an earnings reporting season. As such, it expected that traders and investors will continue to play the market, waiting for the release of more audited results, a situation likely to drive equity prices up and down. Also, it is expected that dividend adjustments and other corporate actions will support oscillation that will create new entrance for market players, especially traders in the post dividend adjustment period which is expected to support positive trend in Q2 all things being equal.
The NGX’s All-Share index is ranging while trading slightly above the T line after testing it on a strong momentum, amid repositioning in some companies and sectors expected to declare dividends between now and March 31, 2023. The actual state of these audited financials will give a clear direction, just as it may support the continuation of this recovery in the new month, notwithstanding uncertainties associated with the 2023 general elections.
Technically, the distribution phase of the market at this level support a pullback, after forming a cup and handle chart pattern on the daily and weekly time frame. This signals a bearish divergence between the index action and MACD on a dally chart that supports correction. Let us keep our gaze on market forces and money flow which is looking down.
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Oil price oscillation continued as it rebounded slightly to trade at $78.38per barrel, after tumbling on fear of SVB collapse and global recession in the midst of slow economic recovery in China and likely rates normalization by the Feds in nearest future as US CPI came in line of market expectation. Also, the attack on Ukraine is rising even when China is calling for peace and a ceasefire. This geopolitical tension, the prevailing high interest rate regime and soaring inflation across the globe remain potent threat to world peace. Also, supply tightened due to the Russia-Ukraine war that entered into it is first year last week. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, Tuesday’s trading opened on the downside and it was sustained for the rest of the session, despite oscillating on buying interests and selloffs in blue chip stocks, a situation that pushed the NGXASI to an intraday low of 55,693.39 basis points from its highs of 55,788.37bps, before closing slightly below its opening figure at 55,722.90bps.
Market technicals were negative and mixed with higher volume of trade, compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 31% buy position and 69% sell volume. The total transaction volume index stood at 0.74 points, just as impetus behind the day’s performance was strong going by Money Flow Index at 65.51pts, from the previous day’s 72.24pts, indicating that funds left the market.
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Index and Market Caps
At the end of Tuesday’s trading, the benchmark index NGXASI slipped by 65.47 basis points, closing at 55,722.90bps, after opening at 55,788.37bps, representing a 0.12% drop, just as market capitalization fell by N35,70bn to close at N30.37tr, from the previous day’s N30.39tr, which also represented a 0.12% value loss.
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Tuesday’s downturn was driven by selloffs in the shares of GTCO, Nahco, Wema Bank, Mansard, Lasaco, Chams, UPDC and Linkage Assurance among others, which impacted mildly on Year-To-Date gain to 8.73%. Market capitalization YTD gain stood at N2.58tr, representing 8.74% above its opening level for the year.
Bearish Sector Indices
Sectorial performance indexes were down, except for the NGX Consumer Goods which closed 0.01% up, while the NGX Insurance led the decliners, after losing 1.91%, followed by Banking and Industrial goods with 0.24% and 0.10% respectively. Just as NGX Oil/Gas closed flat.
Market breadth was negative, as losers outnumbered gainers in the ratio of 17:9, while activities in volume and value were up after investors exchanged 199.27m shares worth N2.81bn. Volume was driven by trades in NGX Group, Sterling Bank, Neimeth Pharm, Zenith Bank, Chams and Ucap.
Enamelware Nigeria and FTN Cocoa were the best performing stocks, gaining 9.57% and 7.69% respectively, closing at N17.75 and N0.28 per share respectively on market forces. On the flip side, Chams and Prestige Assurance lost 8% and 7.32% respectively, closing at N0.23 and N0.38 per share, purely on selloffs and profit taking.
We expect the mixed sentiments and trend to continue as players look forward to more earnings reports in the midst price markdown for dividend. Income investors target dividend paying companies and defensive stocks to protect their portfolios ahead of the governorship election and post dividend adjustment. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
Q2 2023 Investdata Master Class
Theme: Post-Election Investment Opportunities For Consistent Profits In 2023
1. Nigeria: Post-Election Investment Opportunities In Sectors/Industries, Mr Abiola Rasaq, Head Corporate Strategy at CSCS Plc
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This volatile market is not going away any time soon. We have not seen many times like this, since our democratic government started in 1999, especially as the general elections and the post-COVID 19 era have changed the market’s holding structure with domestic investors taking the lead, a situation that has supported today’s trends and patterns. So it is more important than ever to have the best tools and knowledge to benefit most out of this cycle, as the post-election environment once again creates opportunities for money-making moves. That is why I am excited to share something New and Unique in the Q2 Master Class.
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