Market Update for February 1
Equity prices closed higher on the Nigerian Exchange on Tuesday to start the month of February on a positive note, thereby extending the January bull run and positive sentiment on impressive corporate earnings released so far.
Also, more companies with December year end are expected to make their audited financials available with corporate actions any moment from next week. Early filers like United Capital, Africa Prudential, Transcorp, Nigerian Breweries, Zenith Bank, Access Bank, Nestle, Dangote Cement and others that did not release their unaudited Q4 numbers as at January end are expected to do so in the ccoming weeks.
During the rally witnessed at Tuesday’s trading session, many listed companies made new 52-week highs as investors continue to react positively to unaudited quarterly and 2021 full-year results so far submitted to the market. Most of the numbers came healthy and beat analysts expectations. The corporates earnings have given an insight into what the companies final dividend will look like, especially the once that are expected to grow their payout, judging by the Earnings Per Share and established dividend policies.
Technically, the NGX index action has extended its three-day rally on above average traded volume and strong buying interest across the low, medium and high cap stocks to signal the presence of smart money as the market broke out another psychological line at 47,000 on a high volume to continue its positive outing.
Trade metrics revealed strong fundamentals and technicals, as buying sentiments for banking stocks were very strong due to the sector’s consistency in dividend payout.
The day’s candlestick formation had three star soldiers that supported the bull situation, with the benchmark index trading above the 20, 50 and 200-Day Moving Averages, while momentum indicators were strong and positive as the ADX read 54.99, RSI closed above 50 at 71.04 and Money Flow Index is looking up at 79.55 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 the fixed income market yields remains unclear, in the midst of NTB primary market auction rates declined at the end of the week’s event.
Meanwhile, Tuesday’s trading opened on the upside and was sustained throughout the session on buying interest across sectors that pushed the index to intraday low of 47.126.27bps, after breaking out the 47,000bps mark from its lows of 46,626.42bps. Thereafter, the index closed sharply above its opening points at 47.111.21bps.
Market technicals were positive and mixed as volume traded was lower than the previous day’s in the midst of positive breadth and sentiment as revealed by Investdata’s Sentiment Report showing 97% buy volume and 3% sell position. The total transaction volume index stood at 1.08 points, just as momentum behind the day’s performance remained strong. Money Flow Index looking up at 79.55 points, from the previous day’s 76.92 points, indicating that funds entered the market.
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Index and Mkt Cap Movement
The key performance index NGXASI, at the close of trading, gained 486.54 basis points, at 47,111.21bps, after opening at 46,624.67bps, representing a 1.04% growth. Market capitalization rose by N262.18bn, closing at N25.89tr, from the opening value of N25.12tr, also representing a 1.04% appreciation in value.
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We note the decision by the Federal Government to postpone its planned removal of subsidy on premium motor spirit, popularly called petrol for another 18 months. Continuing with the planned removal without fixing the refineries and other critical infrastructure would have worsened the already terrible living conditions of most Nigerians, heightening inflation rate and throwing many more investments into a negative real rate of return.
Tuesday’s bull-run was driven by accumulation in MTNN, Seplat, Lafarge Africa, Presco, Zenith Bank, Acces Bank, UBA, , Flour Mills, Julius Berger, United capital, NGX Group, and GTCO, among others.
This impacted positively on Year-To-Date gain, increasung it to 10.29%. Market capitalization growth stood at N2.84tr YTD, representing a 15.17% rise over the opening level for the year.
Bullish Sector Indices
Performance indexes across the sectors were in green, led by NGX Oil/Gas with 5.43%, followed by Banking, Insurance, Industrial and Consumer goods with 2.15%, 0.84%, 0.38% and 0.19% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 36:21, while activities in volume and value terms were mixed, after stockbrokers transacted 341.52m shares worth N3.69bn, compared to previous day’s 435.80m units valued at N3.44bn.
Volume was boosted by trades in Transcorp, Fidelity Bank, Access Bank, GTCO and NGX Group.
Seplat Energy and Conoil were the best performing stocks for the session after gaining 10% and 9.79% respectively, closing at N869 and N24.10 per share on impressive numbers. On the flip side, Caverton and Eterna lost 9.50% and 9.17% respectively, closing at N1.69 and N5.45 per share, purely market forces and unimpressive earnings report.
We expect positive sentiments to continue in the midst of profit booking and position taking in fundamentally sound and dividend paying stocks in expectation of more corporate earnings, as oil price oscillates to trade at $89.88, which is one factor that also continues to support economic and market fundamentals. Also, investors are targeting dividend paying stocks as they reposition portfolios ahead of 2021 full-year audited earnings reports.
Also, MPC outcome and NTB primary market auction rates that decline on short and long tenor should be a plus for the equity market. Just as inflation remain high at 15.63%. Also noteworthy is the oil price that remains above $74 projection of IMF at $90, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.
As market players digest the outcome of the two events during the week and happenings in fixed income market after the NGX index action pullback to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and January Effect rally pattern which has influenced stock prices ahead of audited 2021 earnings season.
The relatively low volume traded in the midst of uptrend and recovery moves are creating new buy opportunities on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the session revealed that institutional players are not buying yet. It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position.
Even as 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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