Positive Sentiments Ahead, On Dividends Expectation, As Oil Price Hits $92pb

Market Update for February 8

The Nigerian equity market extended its negative outing at the end of Tuesday trading, as traders continued their profit-taking activities from the recent rally, pulling the composite All-Share index lower on a low traded volume and negative market breadth.

The increasing market volatility ahead of more corporate earnings and actions should signal risks associated with oscillation for players to be cautious and play the market intelligently by effectively combining technical and fundamental analyses at any point, especially now to avoid dumping or exiting when there are no buyers. So let your investment goal and stop-loss guide you, despite the impressive numbers released so far that beat expectation, which should give us an insight into what the final dividends of these companies will look like. This is true especially of those expected to grow their payouts, judging by the Earnings Per Share and established dividend policies.  

Technically, the NGX’s index action has pulled back for the third consecutive session, while remaining above the 47,000 mark, despite the tactical change in trend, the two last candlestick formations are yet to confirm direction as of the close of Tuesday’s session. The selling sentiment on a light traded volume signals the activities of retail investors, rather than of smart money as the market awaits a trigger to breakout, or down at this level. Trade metrics revealed the level of indecision among institutional players, as investors wait to see corporate actions that will hit the market, amid profit-taking in banking and industrial goods stocks, after big names like BUA Foods and others suffered losses.

The session’s candlestick formation confirmed a change in trend, as investors look to market forces at the midweek with NTB primary market auction opening today, with NGX index trading above the 20, 50, and 200-Day Moving Averages, while momentum indicators were mixed as the ADX read 61.99, RSI closed above 50 at 72.86 and Money Flow Index is looking down at 68.96 points on the daily time frame. The continuation of this trend depends largely on the interplay of market forces and inflow of funds to the equity space, as the direction of the fixed income market yields remains unclear.

Meanwhile, Tuesday’s trading started slightly on the downside and was sustaining throughout the session on profit booking across all stocks classifications, pushing the index to an intraday low of 47,037.24 basis points, from its highs of 47,203.399bps. Thereafter, the index closed marginally below its opening level at 47.057.24bps.

Market technicals were negative and weak, as volume traded was lower than the previous day in the midst of breadth favouring the bears on selling pressure as revealed by Investdata’s Sentiment Report showing 88% sell volume and 12% buy position. The total transaction volume index stood at 0.73 points, just as the impetus behind the day’s performance remained strong. Money Flow Index dropped to 68.96 points, from the previous day’s 74.47 points, indicating that funds left the market.  

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Index and Mkt Cap Movement 

At the end of Tuesday’s trading, the benchmark NGXASI shed 142.12 basis points, closing at 47,057.24bps, after opening at 47,279.92bps, representing a 0.31% drop. Market capitalization fell by N78.75bn, closing at N25.36tr, from the opening value of N25.44tr, also representing a 0.16% value loss.

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Tuesday’s downturn was driven by selloffs and profit-taking in MTN Nigeria, BUA Foods, United Capital, Unilever, FBNH, Ecobank Transnational Incorporated, GTCO, PZ, and Fidson Healthcare, among others. This impacted mildly on Year-To-Date gain, which dropped to 10.16%. Market capitalization growth stood at N2.80tr YTD, representing a 14.56% rise over the opening level for the year.

Mixed Sector Indices 

Performance indexes across the sectors were mixed, with the NGX Banking and industrial goods closing 0.17% and 0.01% lower respectively, while the NGX Insurance led the advancers after gaining 2.35%, followed by energy and Consumer Goods with 0.86% and 0.04% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 21:18, while activities in volume and value terms were down, after stockbrokers transacted 238.22m shares worth N5.01bn, compared to the previous day’s 285.48m units valued at N5.13bn. Volume was boosted by trades in GTCO, Seplat, Zenith Bank, Transcorp and NGXGROUP.

Presco and NEM Insurance were the best-performing stocks during the session after gaining 10% and 9.97% respectively, closing at N104.50 and N3.31 per share on impressive earnings and market forces.  On the flip side, Courteville Business Solution and UPDC lost 10% and 9.61% respectively, closing at N0.51 and N1.00 per share, on profit-taking and selloffs.

Market Outlook

We expect positive sentiment to return on more audited financials with corporate actions to start to hit the market in the midst of profit-taking and portfolio rebalancing, as market players target fundamentally sound and dividend-paying stocks in expectation of dividend announcement, as oil price oscillates to trade at $92, which is one factor that also continues to support economic and market fundamentals.  Just as inflation stays high at 15.63%.  Also noteworthy is the oil price that remains above the $74 projection of IMF at $92 plus, while the International Monetary Fund is calling for a hike in the interest rate and further devaluation of Naira.

As market players digest the quarterly and unaudited 2021 full-year results available in the market and what is happenings in the fixed income market after the NGX index action pullback slightly to trade above its 50-Day Moving Average on a low sell volume in the face of assets rebalancing and changing pattern in February as the market looks forward to audited 2021 earnings reports.

The relatively low 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 revealed that institutional players are not buying yet.  It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position.  Even as 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