Market Update for April 22
Trading activities on the Nigerian Stock Exchange had a very volatile and mixed session on Thursday sustaining the fifth successive daily bull-run in the midst of the Q1 earnings reporting season and amidst the oscillation in crude oil prices at the international market. The benchmark NGX All Share Index experienced a reduced gaining momentum, as it closed marginally higher on mixed sentiments and below-average traded volume.
The wave of profit booking was evident in all the sectors during the session except for energy sector that sustained the positive trend. We, therefore, expect that traders will likely take profit from this recent bull rally, as the market awaits more Q1 earnings reports between Friday and next week, being the last for the month.
Investors are also eagerly awaiting the 2021 Q1 GDP report expected to hit the market on April 30 from the National Bureau of Statistics, as it would show the state of the economy in the first three months of the year ended March 31, 2021.
This bag of mixed economic indicators and news will help the Monetary policy and fiscal authorities properly dimension the situation and adopt necessary monetary policy tools to direct economic activities. These are not enough to revamp the Nigerian economy of today, if it is to grow at a rate needed to bring the country out of its parlous state.
Already, equity market players have continued to interpret the March inflation data and Q1 corporate earnings released so far to determine the position of the economy. This is without losing sight of the likely outcome of the Monetary Policy Committee (MPC) meeting of next month, knowing that the rising inflation has been of serious concern to Nigerians.
Consequently, equity market players should invest, guided by their set investment objectives, especially entry and exit strategies to survive and profit from the expected new trend. By so doing, should the Q1 earnings reports and corporate actions fail to impact and support this recovery, a big rotation in sector trends should also guide you, going into the future.
Meanwhile Thursday’s trading started on the downside and oscillated throughout on buying interests in blue-chips and profit taking across medium and low-priced equities that rallied recently. This pushed the composite index to an intraday high of 39,151.08 basis points from its lows of 39,099.83bps, and thereafter closed marginally above its opening figure at 39,131.80bps on a positive market breadth.
The day’s market technicals were mixed and weak, with volume traded lower than previous day’s in the midst of breadth favoring the bulls and mixed sentiment as revealed by Investdata’s Sentiments Report showing 62% ‘buy’ volume and 38% ‘sell’ position. Total transaction volume index stood at 0.71 points, just as the impetus behind the day’s performance remained relatively weak, with Money Flow Index looking up at46.63pts, from the previous day’s 39.15pts, indicating that funds entered the market, despite the flat position.
Index and Market Caps
At the close of Thursday trading, the composite NGXASI was up 3.46ps, closing at 39,131.80bps after opening at 39,128.05bps, representing a 0.01% up. This was just as market capitalization limped north by N1.81bn, closing at N20.48tr, which also represented 0.01% value gain.
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Thursday’s marginal upturn was due to positioning in Guaranty Trust Bank, Access Bank, FBNH, and UBA, among others. This impacted mildly on Year-To-Date loss, which reduced to 2.83%, just as market capitalization loss stood at N676.15bn, or 2.64% below the opening value for the year.
Bearish Sector Indices
Performance indexes across the sectors were bearish, except for the NSE Oil/Gas which closed 0.21% higher, while the NSE Insurance led the decliners after shedding 0.40%, followed by Consumer goods andBanking with 0.04% and 0.03% lower. While Industrial goods was flat.
Market breadth was positive, as advancers outnumbered decliners in the ratio of 17:15; just as transactions in volume and value were mixed after stockbrokers crossed 228.11m shares worth N2.64bn, compared to previous day’s 239.25m units valued at N1.66bn. The day’s volume was boosted by trades in Guaranty Trust Bank, Zenith Bank, FBNH, UBA and Access Bank
Cutix and PZ Cussons were the best performing stocks of the session, gaining 7% and 6.93% respectively to close at N2.14 and N5.40 per share respectively on market forces and earnings expectations. On the flip side, EkoCorp and SUNNU Assurances lost 10% and 9.09% respectively, closing at N5.40 and N0.60per share, on selloffs
Market Outlook
NGX index action candlestick formation at the end Thursday trading signaled a bearish pattern, that need to be confirm in today trading, as we expect the mixed trend and profit taking to continue asmore Q1 corporate earnings hit the market from next week in the face of rising yields and portfolio repositioning on the strength of Q1 numbers and March inflation report, aheadof Q1 GDP, PMI and others. Also, the market has broken out of its trading range, as index and price action may discount the prospects for high cap companies as well as blue chip stocks ahead of earnings season.
The pullbacks offer bargain hunters and income investors another opportunity to reposition in high dividend yields and undervalued stocks, while looking out for quarterly numbers that would support recovery. This is based on the fact that the rising fixed income yields may not be enough to scare all investors away from the equity market.
Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities. This is especially given the rising oil prices that have so far supported the economy and equity market, despite the seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation.
However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by 2020 full numbers and expected 2021 Q1 earnings reports, until the next MPC meeting in May.
The NSE’s index action and indicators are heading in the same direction on a low traded volume and positive buying sentiments in the midst of rising yield in bond and TB.
Also, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation in the new year.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08032055467
