Mixed Trend Yet, As Investors Review CBN Action On FBNH, Amidst Rush To Beat Q1 Report Deadline

Market Update for April 29

Equity prices closed higher on the Nigerian Exchange, Thursday, reversing the loss suffered in the previous session as investors reacted to positive and impressive earnings reports released so far to the market.  The earnings have given an insight of a possible stronger first quarter GDP data that would be released by the National Bureau of Statistics, as more Q1 numbers expectedly hit the NGX platform on Friday, being the last trading session for any company to meet the regulatory deadline in line with its post-listing requirement.

The expected Q1 GDP and April Manager Purchasing Index reports from NBS and the Central Bank of Nigeria respectively would also give a direction as to where the economy is headed, besides supporting the seeming recovery as market players realign their portfolios also on the strength of scorecards flowing in.

As the NGX index action breaks out another resistance level of 39,412.15 on the back of positive earnings from Okomu Oil Palm, UACN, Vitafoam, Fidson Healthcare, Julius Berger, May and Baker, as well as Access Bank, among others. This has been aided by buying interests in high cap stocks like Dangote Cement and MTNN that pushed the market higher on price appreciation.

The positive sentiments at the end of the Thursday’s trading, with money flow index still above 60points, and oil price oscillating above $64 per barrel, with forecast that it could touch $80pb by the second half of this year, the market is likely to close positively this month and quarter all things being equal. History is about to repeat itself again as revealed by investdata’s 20-year market data analysis which shows the month of April and Q2 as a period of position taking on the Nigeria equities market.

These Q1 numbers and unfolding events in the economy should provide a clear direction for the purpose of repositioning your portfolios ahead of qualification dates in the new month, just as the market would, expectedly, further react to the face-off between FBN Holdings and the CBN. Already, FBNH’s share price suffered a 6% loss on Thursday. 

All things considered, Investdata urges investors to play the market wisely by letting investment goals guide their decisions, especially entry and exit strategies necessary to ensure they not only survive, but profit from the expected new trend. Be guided also by current price patterns and money flow index now supporting a trend continuation as funds continue entering the market, just as we expect Friday’s trading to confirm direction.

Thursday’s trading opened on the upside after midweek’s pullback on Dangote Cement’s price adjustment for dividend declared by its directors, as well as the sustained uptrend throughout the session on buying interests across high, medium and low cap stocks. This was due to positive earnings that pushed the NGX index to an intraday high of 39,468.34 basis points, from its low  of 38,738.06bps, after which the index closed higher above its opening level at 39,461.20, bps on a less than average traded volume.

The day’s market technicals were positive and strong, with volume traded higher than previous day’s in the midst of positive breadth and buying pressure, as revealed by Investdata’s Sentiments Report showing 99% ‘buy’ volume and 1% sell position. Total transaction volume index stood at 0.83 points, just as momentum behind the day’s performance was relatively strong as Money Flow Index read 61.81pts, from the previous day’s 63.61pts, indicating that funds left the market, despite the up market.

Index and Market Caps

At the end of Thursday’s trading also, the composite index gained 679.72ps, closing at 39,461.20bps after opening at 39,303.09bps, representing a 1.8% growth, just as market capitalization was up by N355.73bn, closing at N20.65tr, also representing 1.8% appreciation in value. 

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Thursday’s upturn resulted from buying interests in Dangote Cement, MTNN, Zenith Bank, Okomu Oil, Vitafoam, Julius Berger, Fidson, UACN, and Africa Prudential, among others, which impacted positively on Year-To-Date loss that reduced to 2.01%. The decline in market capitalization YTD loss stood at N354.10bn, representing a 1.86% drop below its opening value for the year.

Mixed Sector Indices

Performance indexes across the sectors were mixed, as NGX Banking and Consumer goods closed 1.30% and 0.20% lower respectively, while Industrial goods led the advancers after gaining 3.58%, followed by Insurance 1.36% higher.

Market breadth turned positive, as advancers outpaced decliners in the ratio of 24:17; with activities in volume and value terms were up as players traded 270.68m shares worth N2,03bn, compared to the previous day’s 259.51m units valued at N1.91bin. Volume was boosted by trades in FBNH, Transcorp, Ekocorp, Sovereign Trust Insurance and Access Bank.

Julius Berger and Fidson Healthcare were the best performing stocks, gaining 10% each, closing at N20.90 and N5.28 per share on positive sentiment and impressive earnings. On the flip side, Computer warehouse Group and Mutual Benefits Assurance lost 9.84% and 7.5% respectively, closing at N2.29 and N0.37per share, on selloffs and profit taking.

Market Outlook

We expect the mixed trend still, as investors react to CBN and FBNH saga in the midst of positive earnings, in expectation of more Q1 corporate earnings reports, besides profit taking, even in the face of rising virus cases across the globe and high yields in fixed income space. We also expect continued portfolio realignments on the strength of the earnings performance released so far, and ahead of economic data like the 2021Q1 GDP report, and Purchasing Managers’ Index, among others.

Also, the market has moved out of its trading range, waiting to breakout the next resistance level of 39,412.15bps, while trading above the 14 and 20-Day Moving Average. Note that the market may discount the prospects of high cap companies and some blue chip stocks, ahead of their earnings reports.

However, the pullbacks offer bargain hunters and income investors fresh opportunities to reposition in high dividend yields and undervalued stocks, while looking out for quarterly numbers that would support recovery. This is based on the fact that the rising fixed income yields may not be enough to scare all investors away from the equity market.

Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities. This is especially given the rising oil prices that have so far supported the economy and equity market, despite the seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation.

However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by 2020 full numbers and expected 2021 Q1 earnings reports, until the next MPC meeting in May.

The NSE’s index action and indicators are heading in the same direction   on a low traded volume and positive buying sentiments in the midst of rising yield in bond and TB.

Also, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation in the new year.

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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08032055467

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