NGX Index Closes Flat, On Improved Inflation Rate, As Investors Bet On 2021Q4 GDP Data

Market Update for February 15

The Nigerian equity market suffered yet another flat performance on Tuesday, halting two consecutive sessions of pullbacks on the strength of the rekindled buying interest among investors across all classes of stocks ahead of the submission of corporate actions for the financial year ended December 31, 2021.  Players continue to interpret and analyse the impact of the moderation in the consumer price index for January to 15.6%, from 15.63% in the month of December as contained in the latest data of the National Bureau of Statistics released during the trading session.

Despite, the seeming renewed buying sentiment as revealed by the positive market breadth and low traded volume that indicate the wait-and-see attitude of investors and traders towards the corporate disclosures. Also, profit-taking continued in some stocks that recently rallied, especially Ecobank Transnational Incorporated, Guinness Nigeria, Berger Paints, Access Bank, and Zenith Bank, among others. It is expected that the earnings reports and dividend declaration of first tier banks will change the direction of banking stocks, going forward.   

The slight decline in inflation, better-than-expected corporate earnings released so far, in addition to the rising price of crude oil in the international market due to the geopolitical tension, and the prevailing but relatively low interest rate, have revealed the true state of the nation’s economy as all eyes look to the expected release of the Q4 GDP data.  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 flat, amid the ongoing volatility which comes with the earnings reporting season. Here, we advice 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, resisted decline during the session, trading above the 47,000 mark, signaling a change in momentum and trend as index actions and indicators are becoming bearish, looking the same direction in the midst of mixed sentiments on a light traded volume. Investors need to watch this, as funds are not flowing into the market as expected. Trade metrics for the session 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 Flour Mills, among others hit their new 52-week highs at the close of trading.

The candlestick formation at the end of Tuesday’s trading revealed indecision among investors, as they look to market forces, with the NGX index trading below the shortest moving averages and above the 20, 50 and 200. Momentum indicators are looking down, as the ADX reads 62.82. The RSI closed above 50 at 69.64 and Money Flow Index sliding to 52.83 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.

Tuesday’s trading started slightly on the upside and oscillated during the session on position and profit taking in blue chips, pushing the NGX index to an intraday high of 47,107.99 basis points, from its lows of 47,064.93bps, before closing marginally above its opening point at 47,063.28 bps.

Market technicals were positive and mixed, as volume traded was lower than in the previous day amidst breadth favouring bulls on a selling sentiment as revealed by Investdata’s Sentiment Report showing 71% sell volume and 29% buy position. The total transaction volume index stood at 0.83 points, just as energy behind the day’s performance remained relatively strong. Money Flow Index was slightly down as earlier noted, at 52.83 points, from the previous day’s 59,67 points, indicating a flat position as regard funds left the market.  

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Index and Mkt Cap Movement 

At the close of Tuesday trading, the key performance NGX All-Share Index inched up by 1.54 basis points at 47,064.83bps, after opening at 47,063.28bps, representing a 0.003% up, just as market capitalization limped N1.00bn up, closing at N25.363tr, from the opening value of N25.362tr, also representing a 0.003%  value gain.

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The upturn was driven by position-taking in MTNN, Flour Mills, National Salt, Eterna, FCMB, Learn Africa and Cutix, among others. This impacted mildly on Year-To-Date gain, which increased 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, with the NGX Banking and industrial goods closing 1.01% and 0.02% lower respectively, while the NGX Insurance led the advancers after gaining 1.51%, followed by Energy and Consumer Goods with 0.26% and 0.10% respectively.

Market breadth turned positive as gainers outpaced losers in the ratio of 28:23, while activities in volume and value terms were mixed, after investors exchanged 274.21m shares worth N5.67bn, compared to previous day’s 338.03m units valued at N5.68bn. Volume was boosted by trades in Access Bank, Guinness Nigeria, Japual Gold, Sterling Bank and Etranzact.  

Learn Africa and Morison Industry were the best performing stocks for the day, gaining 9.70% and 9.53%, closing at N1.81 and N2.48per share on market sentiment and forces. On the flip side, Berger and Consolidated Hallmark Insurance Plc lost 9.58% and 4.60% respectively, closing at N7.55 and N0.62 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 market interpret the inflation reports that was released, 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 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

Tel: 08028164085, 08179547605