Market Update for April 17
The negative outing on the Nigerian Exchange continued Monday as the benchmark All-Share index opened the week lower on price adjustments for dividend and selloffs in the shares of telecoms giant MTN Nigeria. These dragged the index down, thereby extending the bearish stance and decline phase thereby creating opportunities for bargain hunters and repositioning, a situation likely to support a rebound by the bourse, at a time the prices of many stocks now look very attractive for discerning investors and smart traders.
Despite the seeming low liquidity in the financial market and rising pressure around the prevailing high inflation, interest rates and yields that remain in negative return, especially as the nation’s Consumer Price Index for the month of March hit an 18-year high at 22.04%, even amid anxiety over the ongoing transition of power to a new administration next month. There is also unease over the planned removal of fuel subsidy before the handing over date.
Meanwhile, Nigeria’s economic activities continue to contract as revealed by the latest March Purchasing Manager Index report released by Stanbic IBTC showing a further decline to 42.3 basis points, from 44.7 points in February indicating that private sectors businesses suffered a setback for the period due to the cash crunch, high cost of funds and foreign exchange market hiccups in the face of high rates and inflation.
The NGXASI closed on a bearish note thereby extending the bear run for three consecutive sessions on a low traded volume and negative market breadth amidst buying and selling interest in expectation of pending 2022 audited financials and Q1 2023 earnings reports.
On Monday more companies notified the NGX of their board meeting and approvals of Q1 financials, while Transcorp made available its unaudited Q1 2023 results showing mixed performance to start the new financial year, as all eyes are on the coming AGM of the company as new law in the power space that creates more opportunities for Transcorp to plan.
The NGX has confirmed its decline phase from the overbought state, as the benchmark index currently trades below the 50-Day simple moving average and EMA to signal a bottom reversal pattern for technical traders and discerning investors. This, however, requires confirmation before investors can jump into any position, especially as stocks recently markdown have rebounded on the back of their prevailing undervalued state. Q1 numbers are likely to come predominantly mixed, due to the low economic activities during the period as a result of to cash crunch.
The prevailing dividend yields and low market price to earnings ratio provides better opportunities for discerning investors to hedge against inflation even when fixed income market yields look attractive. There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as a policy shift may be a plus for equities on a likely financial market and economic reset. Market volatility remains at the extreme on mixed sentiment as T-line stay above the index action ahead of the next market forces, due to the increasing number of companies announcing their board meeting dates to approve Q1 2023 numbers.
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Oil price oscillation continued, as it pulls back to trade at $85.23 per barrel in the midst of fear of US Fed rising rates and positive China economic growth report as Q1 GDP was up 4.5%. Just as attack on Ukraine is rising and geopolitical tension here and there across the globe, the prevailing high interest rate regime and soaring inflation, despite slowing down across the globe remain potent threat to world economy. Also, supply tightened due to the Russia-Ukraine war that entered the second year. The up and down movement of oil price also continues to drive volatility across markets.
Monday’s trading started on the downside and was sustained for the rest session due to markdown in blue chip stocks and selloffs in large cap companies, a situation that pushed the NGXASI to intraday low of 51,095.23 basis points from its highs of 51,710.82ps, before closing sharply below its opening figure at 51,120.94bps.
Market technicals were negative and mixed with lower volume traded, when compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 4% buy position and 96% sell volume. The total transaction volume index stood at 0.70 points, just as momentum behind the day’s performance was weak going by Money Flow Index at 31.62pts, from the previous day’s 32.03pts, indicating that funds left the market.
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Index and Market Caps
The benchmark NGX Index at the end of Monday’s trading lost 773.07 basis points, closing at 51,120.87bps from the 51,893.94bps it opened, representing a 1.48% decline, just as market capitalization fell by N417.6bn to close at N27.85tr, from the previous day’s N28.27tr, which also represented a 1.48% depreciation in value.
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Meanwhile, Monday’s downturn was driven by price adjustments and selloffs in the shares of Zenith Bank, UBA, Africa Prudential, Infinity Trust, MTNN, FBNH, Ucap and International Energy among others, which impacted negatively on Year-To-Date as it turned red to 0.24%. Market capitalization YTD loss stood at N24 billion, representing 0.23% below its opening level for the year.
Mixed Sector Indices
Sectorial performance indexes were mixed, as the NGX Banking closed 5.53% lower, while NGX Insurance led the advancers after gaining 0.13%, followed by Consumer goods with 0.07%.
Market breadth turned negative as losers outpaced gainers in the ratio of 18:16, while transactions in volume and value were down after investors exchanged 225.59m shares worth N1.57bn, with volume driven by trades in Transcorp, Fidelity Bank, SterlingNG, Zenith Bank and UBA.
Ikeja Hotel and Transcorp were the best performing stocks for the day after gaining 9.48% and 9.47% respectively, closing at N1.27 and N1.85per share respectively, on market sentiment and forces. On the flip side, Champion Breweries and International Energy Insurance lost 9.94% and 6.98% respectively, closing at N4.45 and N1.20per share, purely on selloff and profit taking.
We expect mixed trading sentiments to continue as bargain hunting and positioning hit the market on low new attractive price levels, ahead of more Q1 earnings expectation in the midst of price adjustments for dividend, while analysts continue to digest the latest inflation data. We note that income investors continue to target dividend paying and defensive stocks to protect their portfolios post-dividend adjustments. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
CRO|Investdata Consulting Ltd
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