Positive Sentiments Ahead, As Income Investors Bet On Earnings

Market Update for February 24

Volatility continued on the Nigerian Exchange Thursday, with the benchmark All Share index rebounding on bullish sentiments, reversing the previous negative outing as earnings release dates of many big names in the market draw closer.

There is also high expectations after the Q3 and unaudited full-year numbers have given insights of what may likely happen in their payout, which will be based on the Earnings Per Share and history.

Consequently, despite the mixed performance of stock markets across the global due to the geopolitical tension arising from the invasion of Ukraine by Russia which triggered global commodity prices, especially oil which now trades above $105 per barrel.

This is causing pains for Nigeria as it is slim for Nigeria as subsidy cost by government would rise far above previous estimates, resulting in more borrowing and higher budget deficits. Nevertheless, the movement in oil prices can support the positive economic trends and market fundamental, as oil and energy sector players benefit more from crude oil price now at its 9-year high.

The seeming calmness and sideways movement of the NGX All Share index over the past two weeks is a sign that the market is still awaiting a trigger, as the market moves to breakout the strong resistance level of 47,335.64 basis points, whole also refusing to breakdown the 47,000 mark, ahead of more 2021 full year audited financials and the expected corporate actions in form dividend payout that will stimulate demand for equities.

Already, the market has treated companies with growth payout fairly since their scorecards were made available. At present, the market looks to results from Zenith Bank, Lafarge Africa, Africa Prudential, Dangote Cement, Access Bank and others as possible triggers.

Until then, we expect market volatility to continue in the midst of earnings reporting season, offering opportunities for the buy and sell sides, but it is more important than ever to get good, clear, and concise information to help firm up your trading and investing plans as the market awaits big names to release their corporate earnings and actions as a push for positive reversal.

With all these in mind, I want to personally invite you to join me live today at Investdata Trading Academy with Ambrose every trading day at noon to get the real live position of the market and direction of individual stocks on exchange. This is necessary to help you make investment decisions at any point. Here, we advise you either as investors and traders to allow their stop-loss and profit targets guide you, while removing every atom of emotion.

Technically, the NGX’s index action, reversed up on the buying interests in low, medium and high cap stocks to signal a change in momentum and trend as index and indicators remain mixed, looking in the same direction amidst positive sentiments on a high traded volume.

Investors need to watch this, as funds are not entering the market as expected due to the absence of institutional investors as the market is moving in sideways.

Trade metrics for the session revealed a rekindled position taking and accumulation, ahead of fundamental news of dividend and others hitting the market any moment from now
Meanwhile, some stocks like Learn Africa, Niger Insurance, May & Baker, Fidson, Ucap, Academy Press, RT Briscoe and Royal Exchange Assurance, among others hit their new 52-week highs at the close of trading.

Candlestick formation at the end of trading dignals that buyers are at work, a situation that will be confirmed by market forces at the opening this morning, apart from showing direction as the NGX index trades on top of the shortest moving averages and above the 20, 50 and 200.

Momentum indicators are turned up, as the ADX reads 62.28. The RSI closed above 50 at 71.28 and Money Flow Index sliding to 61.29 points on the daily time frame. The continuation of this trend depends largely on the interplay of market forces and flow of funds, as direction of fixed income market yields remains unclear, with TB rates declining further.

Thursday’s trading opened slightly on the upside and was sustained throughout the session on buying interest, a situation that pushed the NGX index to an intraday high of 47,295.28 basis points, from its lows of 47,207.27bps. Thereafter, it closed above the opening level at 47,272.04 bps.

Market technicals were positive and mixed, as volume traded was higher than previous day amidst positive breadth and buying sentiment as revealed by Investdata’s Sentiment Report showing 74% buy volume and 26% sell position.

The total transaction volume index stood at 1.10 points, just as momentum behind the day’s performance remained relatively strong. Money Flow Index was up at 61.29 points, from the previous day’s 60.23 points, indicating that funds entered the market.

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Index and Mkt Cap Movement 

The composite index NGXASI, at the end of Thursday’s trading gained 64.77 basis points at 47,272.04bps, after opening at 47,207.27bps, representing a 0.14% up, just as market capitalization rose by N41bn, closing at N25.47tr, from the opening value of N25.44tr, also representing a 0.15% value gain.

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The day’s upturn was driven by accumulation in stocks like Seplat, Vitafoam, NGXGroup, GTCO, Learn Africa, Royal Exchange Assurance and Africa Prudential, among others. This impacted mildly on Year-To-Date gain, which reduced to 10.66%. Market capitalization growth stood at N2.79tr YTD, representing a 14.67% rise over the opening level for the year.

Mixed Sector Indices 
Performance indexes across the sectors were mixed, as the NGX Energy and Insurance index closed higher by 3.85% and 1.01% respectively, while NGX Consumer goods led the decliners after losing 0.61%, followed by Banking with 0.27%, while Industrial goods was flat for the session.

Market breadth was positive as gainers outnumbered losers in the ratio of 25:18, while activities in volume and value terms were up, after stockbrokers traded 340.66m shares worth N3.86bn, compared to previous day’s 230.65m units valued at N3.58bn. Volume was boosted by trades in Custodian Investment, Sterling Bank, Fidelity Bank, Access Bank and United Capital.

Etranzact and Learn Africa were the best performing stocks for the day, gaining 10% and 9.92% respectively, closing at N2.42 and N2.66per share on market sentiment and proposed primary market activity. On the flip side, Multiverse and Japaul Gold lost 8.00% and 5.00% respectively, closing at N0.23 and N0.38 per share, on selloffs.

Market Outlook
We expect sustained positive sentiment on income investors accumulating position ahead of the release of more 2021 audited financials with corporate actions to boost positive vibes during this earnings season and rallying oil prices as it trades at $105.

This is just as the market interprets the positive economic data in relationship with oil price and other factors, in the midst of profit-taking and portfolio rebalancing. This is will result in market players targeting fundamentally sound and dividend paying stocks in hope of dividend announcements, as inflation rate moderates at 15.60% and Q4GDP up at 3.98%, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.

Meanwhile, market players continue to digest the quarterly and unaudited 2021 full-year results available in the market and what is happenings in fixed income market after the NGX index pulled back slightly to trade above its 50-Day Moving Average on a low sell volume in the face of assets rebalancing and the changing patterns in February as the investors look forward to more audited 2021 earnings reports.

The relatively high volume traded in the midst of volatility and recovery moves are creating new buy opportunities on the strength of corporate numbers and economic data.

Also, candlestick formation and volume traded during the session shows that institutional players are not buying yet. It is equally noteworthy that during a ranging market many players sit on the fence waiting for a breakout, or down before jumping into any position. Even so, 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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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605