Market Roundup for April 2021

Transactions on the Nigerian Stock Exchange closed positively on Friday to end the month of April higher, thereby halting two months of correction and pullbacks on renewed buying interests and positive sentiments, with investors reacting positively to corporate actions, while weighing the outpouring of Q1 numbers in the midst of rising inflation and yields in the fixed income space.

History repeated itself again this year, as the transactions on the Nigerian Exchange Limited (NGX) closed positive for the month of April, confirming a 20-year market data analysis of INVESTDATA research. According to the data, the month of April and, indeed, Q2 over the years, have remained a period of position taking on the Nigerian equities market, closing in the green for 12 of the 20-year period, and down in eight years.

Meanwhile, the influx of Q1 financials, few second and third quarter numbers, coupled with unaudited full-year March accounts boosted market recovery this year.

The candlestick pattern that represents the month’s trading activities fully consumed the pattern in the month of March, while technically forming a bullish engulfing and hammer candle that supports a reversal and uptrend. This is therefore signaling the beginning of a short bull-run in the new month, depending on market forces.

Combining this fact with the current situation in the market, we conclude that the market has a stronger possibility of rallying in the month of May, apart from the rising Treasury Bill rates and bond yields that remain threats to the equity prices. Investors reaction to the first quarter numbers recently released and the qualification dates for dividends will determine how far the market will go in this new month.

Nevertheless, we note that economic fundamentals are still mixed and dicey, as all eyes are on such data as the Q1 GDP report, April inflation, Purchasing Managers’ Index, and indeed, the outcome of this month’s Monetary Policy Committee meeting, given the new realities, will go a long way in influencing market performance. We see the on-going fasting and abstinence during the Islamic month of Ramadan by Muslims across the globe, and the usual food scarcity that normally characterize planting season, further impacting Nigeria’s inflation rate negatively. We expect a significant positive adjustment in food inflation, especially with the rising insecurity challenges that have driven farmers off their farms and businesses.

The NGX recorded 20 trading sessions during the month under review, to close higher, with the composite NGX All-Share index oscillated, with 12 trading days of up market, and eight sessions of down market during the period. The benchmark index gained 795.15 points, closing at 39,834.42bp after breaking out the resistance levels of 39,412.30and 39,686.43 from its 39,045.13bp opening level, representing 2.02% growth over the period.

The buying volume of total transactions for the month was 100%, halting the previous months’ down market, as volume index for the period stood at 0.79, while market capitalisation recording N42bn growth to N20.85tr, from an opening value of N20.43tr, representing 2.02% appreciation in value. The market had positive sentiments and reactions to the audited financials and Q1 scorecards that beat investors and analysts’ estimates. The month’s traded volume was down by 37.87% at 5.43bn shares, from 8.74bn units in the previous month.

The NSE All-Share index’s year-to-date loss position stood at 1.08%, just as market capitalisation adjusted down to N209.88 billion representing 0.99% lost YTD from the opening value. 

Market breadth for April was however negative as decliners outpaced advancers in the ratio of 51:39 to short-lived the bear transition, reflecting the mixed economic data, positive sentiments and the barrage of first quarter earnings reports that hit the market. The earnings reports were impressive and higher than market expectations, especially such sectors as Healthcare, Agro-Business, Industrial goods, Telecommunication, Energy, few from Banking and consumer goods. They helped the major index to close positively, except for Banking index that was down on the performing sectors chart for April. 

The sectoral performance chart below shows that premium stocks propelled the market the most in the period under review, gaining 6.93%, compared to 2.02% rally recorded by the benchmark NGX All Share Index. It was followed by the NSE pension which rose by 3.56%, reflecting investor confidence in dividend paying stocks, especially blue chip companies and their resilience over the years; ahead of the NSE industrial goods index, which moved 3.06% up.

This was attributed to the high payout and impressive numbers after it led 2020 price rally in the large cap companies and sector, amidst the relatively low Price-To-Earnings attraction in the market. Other indexes that closed green during the month were: NSE Consumer goods, Energy NSE 50 Index, NSE 30, and NSE Growth. On the flip side, the NSE Banking index took the lead with its 4.76% slip; followed by NSE Insurance  with1.49%.

Best Performing Stocks for April

The month’s best performer was Royal Exchange Assurance, whichis one of the major low price stocks benefiting from the recapitalization activities in its sector, as the market expects it 2020 full year and Q1 2021 results, as thestock closed the month better by gaining a significant 89.29% of its opening price for the month. It was followed by Linkage Assurance, which chalked 41.67%; while Japaul Gold took 36.36%; and Consolidated Hallmark Insurance, 30%.

Low cap companies dominated the top gainers for the month included: Meyer 26.83%; Transcorp, 15.38%; among others.

Worst Performing Stocks for April

The top losers table was led by NCR, which shed 18.64%, on the back of its obviously unimpressive performance, just as market forces and mixed sentiment dragged Unity Bank down by 17.33%; while Caverton Offshore declined by 14.98%; Guinness Nigeria, 14.24%; and GSK, 13.89% on the back of low dividend payout and unimpressive Q1 numbers.

Technical View on Monthly Time Frame

NGX index action resisted decline technically in the month of April, as it formed a bullish engulfing and hammer candlestick that support reversal and uptrend depending on market forces in the new month. The renewed buying interest and positive sentiment for the financials are likely to continue.  The inflow to equity assets as revealed by money flow index supported the seeming reversal on smart money reposition their portfolios.  

Where To Invest And Expectations For the Rest of Q2

The global economy and market remain mixed as vaccine driven economic recovery across climates continue, with the World Bank recently upgrading its economic growth outlook based on the ongoing vaccination and government polices at different level. 

Back home, the seeming economic recovery and mixed indicators are likely to continue in the new month as we expect moreeconomic data and the events to confirm the real state of the nation’s economy as implementation of the 2021 national budget continues. This will be helped by the CBN’s continued intervention in critical sectors to boost productivity needed to create employment and support recovery. Reasons for this are not far-fetched, given the impact of Covid 19 and insecurity in the system.

In May, we expect the release of April consumer price index (CPI) by the National Bureau of Statistics (NBS) that would likely show that inflation is rising further; just as the CBN’s Purchasing Managers Index (PMI) for April is equally expected in this May. The nation’s GDP is also expected this month and would confirm the true state of the economy.

As corporate earnings reporting season has been extended to May and June for the few March year-end accounts, the fundamentals of these earnings and dividend declaration will support the ongoing positive outlook in market. Also, we note that many high cap stocks have this month as their qualification and mark down dates, a situation that will keep the market oscillating and at the same support recovery.

Traders and investors who understand the importance of combining fundaments and technical analysis in making investment decisions in the stock market should take this opportunity to position in some sectors for medium and short-term gains, especially the banking, telecom, Industrial,agribusiness and consumer goods after a carefully study of recent numbers beingmade available to the market.

What to expect in May and June

• Release of more quarterly and full year earnings. Earnings from blue-chip companies may strengthen market fundamentals in May.
• Continuation of oscillating trend of equity prices as a result of repositioning of portfolio along the line of positive numbers and profit taking. Also the second half of this year will likely be dominated by positive sentiment.
• Market outlook for May is mixed but remain dicey, in line with popular saying that traders always “sell in May and come back in October,” which may not be applicable in the current trend of our market that has changed in the last five years.  In the Nigerian market, the month of May has closed positively in 13 times over the 20 years. But with the impressive Q1 numbers so far; the oil price oscillating above $64 per barrel in the global market and the CBN intervening in the FX market to create stability.
• The sustained low valuation in the market may trigger high demand for stocks as players realign their portfolios. However, there is need to invest wisely, using bids, offers and volume when taking decisions as a trader.
• Managing risks and protecting capital at this point is very important, so you will determine when to buy or sell, by watching the stocks and the market, using technical analysis.  Look for investdata daily sentiment timing report and home study video packs
• Let numbers released by the companies guide your decision and time to stay in that position.
• Full-year earnings reports of March year-end companies will start hitting the market this month until June.

As the market phase is changing, it is time to combine fundamentals and technical tools to take decision by knowing the support and resistant levels to reposition or exit any position. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
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