More 2021 Financials Inflow May Propel NGX Index, As Investors Await Jan. Inflation Data

Market Update for February 15

Nigeria’s equity market witnessed another pullback in a volatile session as traders continued their profit booking on the first trading day of the week and ahead of the 2021 audited corporate earnings and dividend announcements. 

Negative sentiments continued to trail the market as investors remain jittery about the state of the economy and the stability of the Naira. The search for greater returns is likely to drive investors’ behaviour this week as they seek to take whatever they can get from the market as soon as the opportunity presents itself. Also, the market looks forward to the release of the January consumer price index today.

The mixed investors’ vibes in the face of market volatility were extended for two consecutive sessions as the key performance index closed lower, even as oil price continues to rally at the international market to trade above $94 per barrel, and the nation’s production output rises to 1.398 million barrels per daily. This, and the payout ratios of listed companies are likely to strengthen the economic and market fundamentals, and at the same time boost market recovery, since the ongoing volatility comes with the earnings reporting season. Here, investors and traders should be guided by their set stop-loss and profit target, by removing emotion.   

Technically, the NGX’s index action has extended its pullbacks to trade above the 47,000 mark, which is signaling a change in momentum and trend as the index action and indicators are becoming bearish, looking in the same direction amidst selling sentiments on a very high traded volume. Investors need to watch this, as funds are not flowing into the market, despite the declining rates in the money market. Trade metrics for the session revealed an increase in profit-taking, ahead of corporate actions hitting the market any moment from now, while some stocks like Academy Press, RT Briscoe, Fidelity Bank, and Guinness Nigeria, among others hit their new 52-week highs at the end of Monday trading.

End of session candlestick formation supports a reversal pattern, as we look to market forces, with the NGX index trading below the shortest moving averages and above its 20, 50, and 200. Momentum indicators were mixed with the ADX reading 63.05, while RSI closed above 50 at 69.68 and Money Flow Index slipped to 59.67 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 the direction of the fixed income market yields remains unclear with rates not rising as expected.

Meanwhile, Monday’s trading opened on the downside and oscillated during the session on selloffs and profit-taking in blue chips stocks, pushing the NGX index to an intraday low of 47,011.74 basis points, from its highs of 47,232.47bps, before closing below its opening point at 47,066.77 bps.

Market technicals were negative and mixed, as volume traded was higher than in the previous day amidst flat breadth and selling sentiment as revealed by Investdata’s Sentiment Report showing 75% sell volume and 25% buy position. The total transaction volume index stood at 1.03 points, just as momentum behind the day’s performance remained strong. Money Flow Index was slightly down as earlier noted, at 59.67 points, from the previous day’s 61.03 points, indicating a flat position as regard funds left the market.  

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Index and Mkt Cap Movement 

The composite All-Share index, at the end of Monday’s trading, shed 127.10 basis points at 47,066.77bps, after opening at 47,202.30bps, representing a 0.29% decline, just as market capitalization fell by N74.92bn, closing at N25.36tr, from the opening value of N25.44tr, also representing a 0.29% depreciation in value.

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Monday’s downturn was driven by profit-taking in Airtel Africa, BUA Foods, Access Bank, NGX Group, Lafarge Africa, GTCO, Oando and Custodian Investment, among others. This impacted negatively on Year-To-Date gain, which dropped to 10.18%. Market capitalization growth stood at N2.76tr YTD, representing a 14.47% rise over the opening level for the year.

Mixed Sector Indices 

Performance indexes across the sectors were mixed, as the NGX Consumer Goods and Banking closed 1.14% and 0.04% higher respectively, while NGX Oil/Gas led the decliners after losing 0.24%, followed by Insurance and Industrial goods with 0.16% and 0.07% respectively.

Market breadth was at par as the number of gainers equaled those of losers in the ratio of 23:23, while activities in volume and value terms were up, after stockbrokers crossed 338.03m shares worth N5.68bn, compared to previous day’s 311.49m units valued at N4.39bn. Volume was boosted by trades in Fidelity Bank, Access Bank, Transcorp, Sterling Bank and GTCO.  

Learn Africa and NCR were the best performing stocks for the day, gaining 10% each, closing at N1.65 and N3.63per share on market sentiment and forces. On the flip side, Japaul Gold and Courtville lost 7.67% and 7.27% respectively, closing at N0.36 and N0.51 per share, on selloffs and profit taking.

Market Outlook

We expect the release of more 2021 audited financials with corporate actions to boost positive vibes during this earnings season as the market expects inflation reports in the midst of profit-taking and portfolio rebalancing. This is 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 remains high at 15.63%, 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 the 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

Tel: 08028164085, 08179547605

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