Mixed Trend Yet As Investors Digest 2021Q4 GDP Data, Earnings Releases

Market Update for February 17

Volatility continued on the Nigerian Exchange at the end of Thursday’s trading, providing opportunities for the buy and sell side, amid the need, more important than ever, for good, clear and concise information to firm up trading and investment plans as the market awaits a major trigger in form of audited accounts and corporate actions.

With all this in mind, I want to invite you to join me live every trading day at noon on “Investdata Trading Academy with Ambrose,” to get the real live position and direction of individual stocks of the Nigerian equity market to help you enhance your investment decision.

You would have noticed the seeming profit taking in highly capitalized stocks, in the face of mixed sentiment and buying interests in blue chips companies with consistent records of dividend payment.  Market breadth was significantly positive on a very high traded volume, which indicates accumulation of position by investors and traders as portfolio repositioning persists ahead of more corporate numbers as the market looks for direction.  

As expected, the National Bureau of Statistics (NBS), on Thursday published Nigeria’s GDP report for the 2021Q4, confirming the sustained growth tempo of the economy for the fifth consecutive quarter since the last recession. The growth was driven by the non-oil sector as earlier indicated by the better-than-expected corporate earnings released so far, in addition to the rising price of crude oil in the international market, and the prevailing but relatively low interest rate regime.  A further GDP growth or expansion in 2022 would give the true state of the nation’s economy, if the effect of the negative base year or quarter is over.  

Noteworthy also is the fact that investors and fund managers are continuing their search for greater returns on their investment, which is likely to drive funds to blue-chips as companies announce their dividend payout plans. The mixed sentiment in the face of market volatility continued as the benchmark index closed slightly higher, amid the ongoing volatility which comes with the earnings reporting season. Here, we advise that investors and traders should allow their stop-loss and profit targets guide them, while removing every atom of emotion.

Technically, the NGX’s index action, pulled back slightly on selloffs in high priced stocks but traded above the 47,000 mark, signaling a change in momentum and trend as index actions and indicators are becoming bearish and mixed, looking the same direction in the midst of mixed sentiments on a high traded volume. Investors need to watch this, as funds are not flowing into the market as expected. Trade metrics for the session, however, revealed a decrease in profit-taking, ahead of corporate actions hitting the market any moment from now, while some stocks like Learn Africa, RT Briscoe, Fidelity Bank and NNFM, among others hit their new 52-week highs at the close of trading.

The candlestick formation at the end of Thursday’s trading revealed sideways movement and indecision among investors, as they look to market forces, with the NGX index trading on top of the shortest moving averages and above the 20, 50 and 200. Momentum indicators are looking down, as the ADX reads 62.44. The RSI closed above 50 at 69.93 and Money Flow Index sliding to 66.73 points on the daily time frame. The continuation of this trend depends largely on the interplay of market forces and flow of funds into the equity space, as direction of fixed income market yields remains unclear with rates not rising as expected.

Thursday’s trading started slightly on the upside and oscillated on position and profit taking in high cap equities, pushing the NGX index to an intraday low of 47,074.78 basis points, from its highs of 47,128.46bps. Thereafter, it closed marginally below the opening point at 47,102.64bps.

Market technicals were positive and mixed, as volume traded was higher than in the previous day amidst breadth favouring the bulls on a mixed sentiment as revealed by Investdata’s Sentiment Report showing 52% buy volume and 48% sell position. The total transaction volume index stood at 1.17 points, just as energy behind the day’s performance remained relatively strong. Money Flow Index was up as earlier noted, at 66.73 points, from the previous day’s 59,52 points, indicating funds entered the market, despite sliding down.  

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Index and Mkt Cap Movement 

The key performance NGX All-Share Index at the end of the day’s trading, slipped down by 6.61 basis points to 47,102.64bps, after opening at 47,109.25bps, representing a 0.01% drop, just as market capitalization fell N1bn closing at N25.39tr, from the opening value of N25.39tr, also representing a 0.01% value loss.

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However, the session’s downturn was driven by selloffs in Seplat, MTNN, Zenith Bank, NGXGroup, Fidson, Eterna and CWG, among others. This impacted mildly on Year-To-Date gain, which slipped to 10.27%, just as market capitalization growth stood at N2.72tr YTD, representing a 14.55% rise over the opening level for the year.

Bullish Sector Indices 

Performance indexes across the sectors were in green, except for the NGX Oil/Gas that closed 3.08% lower, while the NGX Insurance led the advancers after gaining 0.54%, followed by Banking, Consumer Goods and Insurance with 0.36%, 0.22% and 0.11% respectively.

Market breadth turned positive as gainers outnumbered losers in the ratio of 32:17, while transactions in volume and value terms were mixed, after stockbrokers crossed 357.76m shares worth N6.48bn, compared to previous day’s 318.27m units valued at N8.26bn. Volume was boosted by trades in GTCO, Ucap, Fidelity Bank, Access Bank and FCMB. 

NNFM and RT Briscoe were the best performing stocks for the day, gaining 10% each, closing at N9.90 and N0.55per share on market sentiment and forces. On the flip side, CWG and Champion Breweries lost 9.80% and 8.90% respectively, closing at N1.11 and N2.05 per share, on selloffs and profit-taking.

Market Outlook

We expect mixed trend as players digest the 3.98% growth in 2021Q4 GDP and expectation of  more 2021 audited financials with corporate actions to boost positive vibes during this earnings season, amid the continued interpretation of other positive economic data  released recently, in the midst of profit-taking and portfolio rebalancing. This will result in market players targeting fundamentally sound and dividend paying stocks in hope of dividend announcements, as oil trades at $94pb, just as inflation rate moderates at 15.60%, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.

Meanwhile, market players continue to digest the quarterly and unaudited 2021 full-year results available in the market and what is happenings in fixed income market after the NGX index pulled back slightly to trade above its 50-Day Moving Average on a low sell volume in the face of assets rebalancing and the changing patterns in February as the investors look forward to more audited 2021 earnings reports.

The relatively low volume traded in the midst of volatility and recovery moves are creating new buy opportunities on the strength of corporate numbers and economic data. Also, candlestick formation and volume traded during the session shows that institutional players are not buying yet. It is equally noteworthy that during a ranging market many players sit on the fence waiting for a breakout, or down before jumping into any position. Even so, many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield capable of serving as a hedge against inflation.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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