Mixed Trends Ahead, As Investors Eye Jan. Inflation Data, 2022 Audited Earnings Inflow

Market Update for the Week Ended February 10 and Outlook for Feb 13-17

It was a ranging week on the Nigerian Exchange due to profit taking, full of mixed sessions and sentiments ahead of more 2022 audited financials and the January consumer price index reports from the National Bureau of Statistics (NBS), as political parties wind down their campaign activities ahead of the February 25, presidential and national assembly election. Also, Ellah Lakes’ right issue kicked off February 10, 2023.
This is despite the mixed sentiments in the face of cautious trading and disconnection of rates in the fixed income market, looking at the continued decline in NTB auction rates and yields for the fifth successive primary market offers. The equity market maintained its upbeat and bullish transition for the fifth consecutive weeks on a low traded volume and negative market breadth in the mixed of better than expected unaudited corporate earnings and actions, while all eyes are on the early filers scorecards and dividend announcements any moment from this week. The state of these numbers are expected to give market direction.
The NGX Index’s action during the period broke out a strong resistance level of 54,290.84 basis points to test 54,441,81bps level, just as the last resistance level of 54,290.84bps turned support level to watch, because a breakdown of this support level as the index side trend will confirm a downtrend depending on market forces. This just as more audited earnings are expected to hit the market in coming days and weeks.
Already, the market remains above its 15-year high irrespective of the seeming profit booking and cautious trading, income investors had continued to increase their positions in dividend paying companies with strong earnings that could support higher payout. We note that the market holding structure and investing public perception have supported the rally so far in the face of mixed macrocosmic conditions, changing yields environment and the prevailing political uncertainty around the general election which begins in a matter of days. We note also that a material change in rates and price behavior may support uptrend further, even as technical tools are revealing the last minutes’ price markup by smart money or institution investors. So, let waits for confirmation.
The mixed sentiments and selloff across some major sectors and other indexes of the market revealed profit taking but did out affect the bullish stance as momentum remained strong to support trend on short and medium-term to give a clear direction. This may signal the continuation of this recovery in the month and quarter, notwithstanding uncertainties associated with the elections, and the possibility of a post-election rally, if every things goes well.
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Oil price during the week rebounded to trade at $86.40 as its continued to oscillates, on Russia propose production cut due to price cap on its oil to bring another disruption in supply, as recovery in China economy and weak dollar could help avert recession in the midst rate hike slowing down in US and others climates due to inflation easing across the globe. We note also the geopolitical tensions and supply tightening due to the Russia-Ukraine war which has lingered for almost a year, having broken out on February 24, 2022. The up and down movement of oil price also continues to drive volatility across the globe.

Movement Of NGXASI
The NGX had a seesaw movement for the week, after recording two trading sessions of up market and three days of selloffs, following profit-taking on the strength of capital gains recorded so far in the bull-run. The pullbacks in blue chip companies and dividend paying stocks had created buy opportunities for discerning investors, just as the benchmark index closed higher, to trade above 54,000 level on a mixed sentiment and strong momentum.
The week trading started on a positive note, extending the previous session gain, with 0.29%, a trend that was reversed on Tuesday when the index shed 0.13% on profit taking but rebounded at midweek with a recovery of 0.23% on position taking in dividend stocks. The market pullback on Thursday and Friday with 0.12% and 0.06% respectively. These brought the week’s total gain to 0.21%, compared to the previous week’s 2.95% positive close.
In all, the composite NGX All-Share Index gained 114.21 basis points, closing at 54,327.30bps, compared to the week’s 54,213.09 points opening level, after touching an intra-week high of 54,441.81bps, from its lows of 54,206.40points. Similarly, market capitalisation rose by N63bn, also representing a 0.21% appreciation in value at N29.59tr, from the previous week’s N29.53tr,
The top advancers for the period was dominated by low and medium cap stocks, amid mixed sentiments and cautious trading, while income investors are positioning in dividend paying companies as volatility and portfolio repositioning continued. Also notable is the fact that market players were booking profit from different sectors ahead of their corporate actions. So buying into value, strong earnings and high dividend yield companies continued, as market recovery persist heading for 54,817.28 and 55,000 levels.
Market technicals revealed a negative breadth as losers outnumbered gainers in the ratio of 45:24 on a mixed sentiment as indicated by investdata sentiment report showing 51% ‘buy’ volume and 49% sell position. Money Flow Index looking up to 89.28bps, from the previous week’s 83.50points, an indication that funds entered the market on a weekly chart to reflect buying interest in some stocks, despite profit taking in the midst of declining yields in fixed income space.
The NGX index’s action maintained its bullish rally after breaking out a major resistance level of 54,290.81points, which also turn a support level after testing 54,441.84bps to pullback on profit taking, as the market ranges to confirm a clear direction. Also, market players look forward to a financial market, economic and political reset that will drive higher returns in 2023 and beyond. Looking at the bullish ‘V’ shape chart pattern on a weekly time frame which signaled continuation of trend, volatility and profit taking
Despite, the market closing high, buyers and sellers continue to fight for dominance, as index action trade above the T-line and other moving averages like 100, and 200, as all eyes are on earnings fundamentals that will give direction as trading opens this morning. We note that the volume that supported this recovery and rally remain mixed and above the market’s traded average, just as corporate actions and others could support the uptrend further into late February as Nigerians goes into 2023 poll.

Mixed Sectoral Indices
Sectorial performance indexes for the week closed mixed, as NGX Industrial and Energy closed marginally higher by 0.65% and 0.63% respectively, while NGX Insurance led the decliners’ after shedding 3.32%, followed by Banking and Consumer Goods with 0.90% and 0.63%respectively.
Transactions in volume and value were down, as stockbrokers transacted 994.29m shares worth N22.71bn, compared to the previous week’s 3.79bn units valued at N27.60bn, volume was driven by Financial Services, Consumer goods and Conglomerates. Specifically, led by trades in GTCO, Universal Insurance, Transcorp, Zenith Bank and NNFM.
Tripple Gee and International Energy Insurance were the best-performing stocks for the week, gaining 30.48% and 25.25% respectively, closing at N1.37 and N1.24 per share on market forces and MTO price of N1.60. On the flip side, FYN Cocoa and Prestige Assurance shed 15.15%and 13.04% respectively, at N0.28 and N0.40 per share, purely on selloffs.

Outlook for the week
We expect a mixed trends and sentiments to continue as investors look forward to January CPI and more 2022 audited earnings reports. The market index is already eyeing the 55,000 psychological level in the new week. However, retracement to the 52,878.12 level and below is possible on profit taking as global and domestic events unfold in the new week and beyond.

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