Positive Sentiments May Linger, As Investors Bet On Inflation, Position Amidst Impressive Earnings

Market Update for February 14

Tuesday’s trading activities on the Nigerian Exchange was mixed to continue its upbeat in the face of the increased buying interests in consumer goods and others that pushed the benchmark NGX All-Share index higher as it broke out the latest resistance of 54,441.84 basis points on a low traded volume and slightly negative breadth. It thereby extended previous day’s gain, as portfolio rebalancing continued ahead of more corporate earnings and the January inflation figure release, while the divergence between the MPR and interest rates in the fixed income space continued.
As the dividend yields in equities remain high, despite the bull transition in the midst of the earnings reporting season and rising inflation, while all eyes are on the January consumer price index report today, had made the stock market more attractive in the prevailing disconnection between the monetary policy rate of 17.5% and the declining rates in the fixed income market. Looking at the impressive numbers which are expected to support higher payouts, or dividend growth in this season, as the dates draw closer for the presidential and national assembly elections.
Tuesday’s breakout resulted from the strong momentum and buying pressure in some stocks with value, despite profit taking in financial stocks that had rallied recently. This uptrend is expected to be strengthened on corporate actions and earnings of early filers and others in the near term and during post earnings season before the governorship election or after, due to price adjustment for dividend declared.
The buying sentiments across some major sectors of the market, except for banking and insurance that witnessed selloffs on traders cashing out their profit may continue to support the rally as revealed in the short and medium-term trends which remain intact. Midweek’s trading will give a clear direction as more companies release their scorecards, just as it may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the coming 2023 general elections.
Technically, the NGX index’s action had signal markup phase which support the bullish V-shape pattern that indicates reversal or continuation of trend on a daily and weekly time frame. Just as there is a divergence between the index action and MACD on a dally chart that supports price correction, due to profit taking in blue chip stocks. Let us keep our gaze on market forces and money flow.
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Oil price oscillation continued, pulling back to trade at $84.68 per barrel, on massive crude build pressure and uptick in US consumer price index in the midst of rising attacked on Ukraine. 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, Tuesday’s trading started slightly in the downside, but rebounded in the mid-morning, a situation that was sustained for the rest of the session, on buying interest MTNN and other blue chip stocks, despite profit taking, pushing the NGXASI to an intraday high of 54,542.10 basis points from its lows of 54,338.99bps, before closing above its opening figure at 54,486.31bps.
Market technicals were flat and mixed, with higher volume of trade, compared to the previous session in the midst of breadth favoring bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 77% buy position and 23% sell volume. The total transaction volume index stood at 0.60 points, just as energy behind the day’s performance was strong as Money Flow Index looked up at 85.57pts, from the previous day’s 83.19pts, indicating that funds entered the market.
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Index and Market Caps
At the close of Tuesday’s trading the NGXASI gained 131.64 basis points, closing at 54,496.31bps, after opening at 54,364.67bps, representing a 0.24% growth, just as market capitalization rose by N75.71bn closing at N29.68tr from the previous day’s N29.61tr, which also represented a 0.24% appreciation in value.
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Tuesday’s upturn was driven by accumulation in the shares of MTNN, Guinness, Cadbury, International Breweries, Dangote Sugar, Onado and Tripple Gee among others, which impacted posotively on Year-To-Date gain to 6.33%. Market capitalization YTD gain increased at N1.86tr, representing 6.33% above its opening level for the year.

Mixed Sector Indices
Sectorial performance indexes for the session were mixed, as NGX Banking and Insurance closed 0.53% and 0.23% lower respectively, which NGX Consumer Goods led the advancers after gaining 0.41%, followed by Industrial goods with 0.04%. Just as NGX Energy closed flat.
Market breadth was slightly negative as losers outnumbered gainers in the ratio of 18:17, while activities in volume and value were up, as investors exchanged 177.92m shares worth N5.69bn. Volume was driven by trades in BUA Foods, UBA, Accesscorp, Sterling Bank and CWG.
Tripple Gee and Courtville Business Solution were the best performing stocks after gaining 9.49% and 8.33% respectively, closing at N1.50 and N0.52per share respectively on market forces. On the flip side, International Energy Insurance and Livestock lost 6.20% and 5.45% respectively, closing at N1.21 and N1.04per share, purely on profit taking.

Market Outlook
We expect mixed and positive sentiments to continue as market players position in financial stocks and others in the midst of impressive corporate earnings and portfolio rebalancing. As all eyes are on inflation report today, amidst the release of more audited earnings, falling rates and anxiety over the 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
Tel: 08028164085, 08179547605