Positive Sentiment May Linger On Profit Taking, Portfolio Rebalancing Amidst Earnings Inflow

Market Update for February 1

Equity prices closed higher on the Nigerian Exchange at the midweek as the month of Friday started positive, extending the January bull-run and positive sentiment on the back of impressive corporate earnings released so far. This is just as 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, Accesscorp, Nestle, and Dangote Cement, among others that did not release their unaudited Q4 numbers as of January end are expected to publish their audited numbers in the coming weeks, and before close of business March 1, 2023.
During the rally witnessed at Wednesday’s trading session, many listed companies appreciated in price as investors continue to react positively to unaudited quarterly and 2022 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.
The positive sentiment and increasing buying interest across some major sectors of the market despite the less than average volume which may continue to support the rally as revealed in the short and medium-term trends which remain intact, but Thursday’s trading will give a clear direction as more companies release their scorecards. This may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the coming 2023 general elections, and possible post-election rally, all things being equal.
Technically, the NGX index action had extended its markup phase that need to follow through in the face of a topping chart and bullish V-shape pattern that supports reversal or continuation of trend on a daily and weekly time frame. Just as there is a convergence between the index action and MACD on a dally chart that supports uptrend, due to position taking in blue chip stocks. Let us keep our gaze on market forces and money flow.
To navigate the rest of the quarter profitably using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent range market.Despite the low volume of transaction witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”
Oil price oscillation continued, pulling back to trade at $83.59 per barrel, on fear of OPEC increasing output in their coming meeting and recovery in China economy in the midst of rising attacked on Ukraine and fear of global recession. Just as the geopolitical tension, high interest rate and inflation across the globe continue to threaten the world. Also, supply tightened due to the Russia-Ukraine war that has lingered so far. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, midweek’s trading started slightly in the upside and pulled back before rebounding for the rest of the session on position taking in banking, energy stocks and others, a situation that pushed the NGX’s index to an intraday high of 53.499.68 basis points from its low of 53,234.31bps, before closing above its opening points at 53,499.68bps.
Market technicals were positive and mixed, with lower volume of trade, compared to the previous session in the midst of flat breadth on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 0.83 points, just as momentum behind the day’s performance was relatively strong as Money Flow Index looked flat at 63.57pts, from the previous day’s 63.65pts, indicating profit takers are in the market.
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Index and Market Caps
The key performance NGX All Share Index, at the end of the day trading gained 261.01basis points, closing at 53,499.68bps, after opening at 53,238.67bps, representing a 0.49% growth, just as market capitalization rose by N142.16bn closing at N29.14tr from the previous day’s N28.99tr, which also represented a 0.48% value gain.

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The upturn was driven by accumulation in the shares of Seplat, Geregu Power, NNFM, Nahco, ING, FCMB, Fidelity Bank, Accesscorp, CHI Plc and International Energy among others, which impacted positively on Year-To-Date gain to 4.39%. Market capitalization YTD gain stood at N1.23 tr, representing 4.39% above its opening level for the year.

Mixed Sector Indices
Sectorial performance indexes for the session were mixed, as NGX Energy and Banking closed higher by 3.61% and 1.22% respectively, while NGX Insurance led the decliners after losing 1.34%. followed by Consumer and Industrial goods with 0.11% and 0.02% respectively.
Market breadth was slightly negative as losers outpaced gainers in the ratio of 20:19. whereas activities in volume and value were mixed, after players exchanged 200.37m shares worth N5.52bn. Volume was driven by trades in Universal Insurance, GTCO, UBA, Transcorp and Geregu Power.
Seplat and Industrial Medical Gas were the best performing stocks, after gaining 10% each, closing at N1,210 and N7.70per share respectively on market forces and earnings expectation. On the flip side, Guinness and Ardova lost 10% and 9.95% respectively, closing at N63.00 and N17.20per share, purely on profit taking and unimpressive earnings performance.

Market Outlook
We expect positive sentiment to continue on position and profit taking as portfolio rebalancing in the midst of impressive corporate earnings and divergence in fixed income rates and MPR, on more audited earnings expectations and election uncertainty. Any pullback at this point may add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Crucial Announcement
As the new year begins, you need to get started with activities that will help you in achieving your goals for the year. To this end, I must tell you that events and activities that happened in 2022 will shape 2023.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
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