Mixed Trends, But Caution Ahead As Investors Bet On Polls Outcome, Audited Earnings Inflow

Market Update for the Week Ended February 24 and Outlook for Feb 27-Mar 3

Trading activities on the Nigerian Exchange during the general election week rebounded powerfully on the strength of increasing accumulation of dividend paying stocks by investors, including smart money, which was enough to override election risks, as all eyes remain on the 2022 full-year corporate earnings and dividend announcement. Already, early filers such as Nigerian Breweries, BUA Cement and Dangote Cement, have continued to release their numbers, declaring final dividends of N1.03, N2.80 and N20,00 respectively, alongside their audited financials which are positive and mixed.
Despite the mixed macroeconomic reports from the National Bureau of Statistics (NBS), the performance of listed companies on the exchange has been impressive. For instance, the economy expanded by 3.52% in 2022 Q4, but recorded a slowdown to 3.10% on year-on-year, when compared to the 3.40% reported in the corresponding period of 2021, in the face of global and domestic headwinds that however revealed opportunities for discerning investors in sectors that supported the national growth.
Since every investment is against future expectations and market direction, activities in the last few days of February and next month will be largely driven by market reactions to outcomes of the ongoing general elections and corporate earnings released. All things considered, the emergence of a clear winner in the presidential election will boost confidence and attract more players to the market. Anything to the contrary may affect the economy and market in the short-term.
The buying sentiment and portfolio reshuffling in the face of the uptick in fixed income market rates and yields after the NTB auction offer rates suffered a decline for the fifth consecutive week suggests a disconnection from the Monetary Policy Rate of 17.5%. Also, the latest inflation data shows a resurgence to its 17-year high of 21.82% in January, compared to 21.34% recorded in December 2022.
The NGX Index’s action broke out its 16-year strong resistance levels of 54,290.84 points and 54,607.81 basis points to trade above 54,900 points on a positive technicals and price appreciation in some high cap stocks that supported uptrend and form a toping chart pattern that support reversal and continuation of trend depending market forces in the new week, as more audited earnings are expected to hit the market in coming days and weeks. We note also that a material change in rates and price behaviour may support a further uptrend, even as technical tools are revealing the last minute price markup by smart money or institution investors. So, let waits for confirmation as Monday trading opens.
The bull sentiment across the major sectors and other indexes of the market supported the uptrend as all eyes are on corporate earnings and actions, knowing that the medium and long-term trends are still intact, but this week trading will give a clear direction as more companies release their scorecards and react positively as these numbers offer insights into what investors should expect as dividend from the companies. This may signal the continuation of this recovery in the month of February, 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 continued its oscillation, as it rebounded to trade at $83.16 per barrel as Russia oil sell way above the cap price. Just as recovery in China economy and strong dollar could trigger recession in the midst rate hike in US and others climates due to inflation uptick 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 and escalating, 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
It was a bullish week with a day of marginal decline in the benchmark NGX All-Share index and four sessions of up market, owing to position taking in highly priced stocks and blue-chips with dividend paying history. This pushed the index toward the 55,000 level to 54,949.21 basis points on a buying sentiments, ahead of corporate actions that now make the market attractive for dividend income investors.
The week’s trading opened on a positive note, reversing the loss recorded in the previous session after the index gained 0.78%, a trend that was short-lived on Tuesday when the market lost a marginal 0.06%. It retraced 0.12% up by the end of midweek’s session, a situation that was sustained on Thursday and Friday when the NGX gained 0.61% and 0.55% respectively, bringing the week’s total gain to 2.13%, which conveniently wiped out previous week’s 0.96% loss.
In all, the key performance NGX All-Share Index gained 1,144.75 basis points, closing at 54,949.21bps, compared to the week’s 53,804.46 points opening level, after touching an intra-week high of 54,955.12bps, from its lows of 53,796.91points. Similarly, market capitalisation rose by N621bn, also representing a 2.13% appreciation in value at N29.93tr, from the previous week’s N29.30tr,
The top advancers’ table for the period was dominated by low, medium and high cap stocks amid buying sentiments and position taking in dividend paying companies as volatility and portfolio repositioning continued. Also notable is the fact that market players were accumulating positions after seeing the unaudited results 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 55,000 and 55,118.81 levels.
Market technicals revealed a positive breadth as advancers outnumbered decliners in the ratio of 40:20 on a buying sentiment as indicated by investdata sentiment report showing 99% ‘buy’ volume and 1% sell position. Money Flow Index looking up to 90.20bps, from the previous week’s 90.12points, an indication that funds entered the market on a weekly chart to reflect buying interest in some stocks and major sectors of the market, despite election risk and uptick in fixed income market yields.
The NGX index’s action maintained its bullish rally, despite uncertainties regarding the election and profit taking ahead of a major resistance level of 55,000 mark and more financials, as market players look forward to a financial market, economic and political reset that will drive higher returns in 2023 and beyond. Just as the ‘V’ shape chart pattern on a weekly time frame, indicates continuation of trend or reversal due to profit taking and extreme volatility.
Position taking remained dominant as the index traded above the T-line and other moving averages like 100, and 200, even forming a topping chart at different levels of its recovery move from 43,418.26 that signaled reversal or continuation of trend, depending on market forces, as all eyes are on 2022 financials that will give direction as trading opens on Monday. 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 early March

Bullish Sectoral Indices
Sectorial performance indexes for the week closed higher, except for the NGX Insurance that closed flat, while the NGX Consumer goods led the advancers’ after gaining 6.30%, followed by Energy, Banking and Industrial goods with 2.74%, 2.21% and 0.34% respectively.
Transactions in volume and value were mixed, after investors exchanged 674.69m shares worth N23.91bn, compared to the previous week’s 751.99m units valued at N20.58bn. Volume was driven by Financial Services, Consumer and Industrial goods. Specifically, led by trades in GTCO, UBA, FBH Holdings Transcorp and Dangote Cement.
MRS Oil and John Holt were the best-performing stocks during the week, gaining 32.38% and 32.33% respectively, closing at N30.55 and N1.75per share on market forces and impressive Q4 earnings report. On the flip side, Capital Hotel and Vitafoam had 9.42%and 7.18% respectively, at N2.50 and N4.76 per share, purely on profit taking.

Outlook for the week
We expect a mixed trends and sentiments to continue as investors awaits election outcome and uptick in rates and yields in fixed income as more companies’ earnings reports are expected to roll in this week. The market index is already eyeing the 55,000 psychological level in weeks to come. However, retracement to the 53,578.12 level and below is possible on profit taking as global and domestic events unfold.
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