Trend May Linger, As Investors Digest Feb. Inflation Data Ahead Of Next Week’s MPC Meeting

Market Update for March 15
The sell side pressure and volatility on the Nigerian Exchange continued at the midweek following the fear of a contagion of bank failures in mature economies following the collapse of Silicon Valley Bank in the US. Also on Wednesday, Credit Suisse became the latest lender to come under heavy sell pressure on concerns over the bank’s financial situation further swelling the fear of a contagion the globe. The Nigerian market is not isolated because a contagion flows from one market, sector, or region to another and can occur at both a domestic and international levels.
The market pulled back to trade below the T line, on a selloffs in the highly priced stocks and some blue chip companies that suffered losses during the session but still remained within the consolidation level even as inflation for the month of February inched up by 0.09 points to 21.91% from 21.82% in January, while the outcome of the TB primary market auction rates stayed mixed with the 162-day and 364-day tenors fell to 5% and 9.49% respectively, while 91-day rose to 2.55%, while all the tenors witnessed oversubscription ahead of next week’s meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee .
Meanwhile, more corporate earnings are expected ahead of qualification dates for dividends and price adjustments announced before the Annual General Meetings where the shareholders will approve them for payment. Also, investors are anxiously looking forward to Saturday’s governorship and State Houses of Assembly elections across the country.
The benchmark NGX All-Share index moved southward on price declines in selected stocks that weighed on the index on less than average traded volume and negative market breadth which extended the bear run for the fourth consecutive days. Despite the market pulling back, there were position taking in the face of mixed sentiments, as more companies notified the exchange of their board meetings to approve audited results and recommend dividends for the period. Already, the unaudited accounts have given investors an insight into what will likely be proposed by their boards as dividend, following which such results should hit the market any moment before the month end.
With the election season gradually winding down this weekend, it is expected that political uncertainties and fear will reduce, since the continuity that supports investment inflow is being built in the midst of an earnings reporting season. As such, it expected that traders and investors will continue to play the market, waiting for the release of more audited results, a situation likely to drive equity prices up and down. Also, it is expected that dividend adjustments and other corporate actions will support oscillation that will create new entrance for market players, especially traders in the post dividend adjustment period which is expected to support positive trend in Q2 all things being equal.
Technically, the distribution phase of the market at this level support a pullback, after forming a cup and handle chart pattern on the daily and weekly time frame. This signals a bearish divergence between the index action and MACD on a dally chart that supports correction. Let us keep our gaze on market forces and money flow which is looking down.
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Oil price oscillation continued as it rebounded slightly to trade at $74.51per barrel, on fears of banks failure after SVB collapse and intervention in Credit Suisse lender in the midst of slow economic recovery in China and likely rates normalization by the Feds in nearest future as US CPI came in line of market expectation. Also, the attack on Ukraine is rising even as China is calling for peace and a ceasefire. This geopolitical tension, the prevailing high interest rate regime and soaring inflation across the globe remain potent threats to world peace, just as supply tightened due to the Russia-Ukraine war that entered into it is first year last week. The up and down movement of oil price also continues to drive volatility across markets.
Midweek trading started on the downside and it was sustained for the rest of the session, despite oscillating on buying interests and selloffs in blue chip stocks, a situation that pushed the NGXASI to an intraday low of 55,441.60 basis points from its highs of 55,722.99bps, before closing below its opening figure at 55,490.20bps.
Market technicals were negative and mixed with lower volume of trade, compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 17% buy position and 83% sell volume. The total transaction volume index stood at 0.67 points, just as impetus behind the day’s performance was strong going by Money Flow Index at 59.37pts, from the previous day’s 65.51pts, indicating that funds left the market.
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Index and Market Caps
The NGX All Share Index at the end of Wednesday’s trading shed 232.70 basis points, closing at 55,490.20bps, after opening at 55,722.90bps, representing a 0.42% decline, just as market capitalization fell by N126.76bn to close at N30.23tr, from the previous day’s N30.36tr, which also represented a 0.42% deprecation in value.

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Meanwhile, midweek’s downturn was driven by selloffs in the shares of Geregu Power, Flourmill, GSK, UPL, Ucap and Zenith Bank among others, which impacted negatively on Year-To-Date gain to 8.27%. Market capitalization YTD gain stood at N2.38tr, representing 8.29% above its opening level for the year.

Bearish Sector Indices
Sectorial performance indexes were down, except for the NGX Insurance which closed 0.44% higher, while the NGX Banking led the decliners, after losing 1.95%, followed by Consumer and Industrial goods with 0.29% and 0.01% respectively. Just as NGX Oil/Gas closed flat.
Market breadth was negative, as losers outnumbered gainers in the ratio of 19:11, while transactions in volume and value were mixed after players transacted 181.19m shares worth N3.41bn. Volume was driven by trades in GTCO, Transcorp, Zenith Bank, Flourmill and UBA.
Prestige Assurance and Veritaskap were the best performing stocks, gaining 7.89% and 5.00% respectively, closing at N0.41 and N0.21 per share respectively on market forces. On the flip side, Ucap and University Press lost 9.30% and 7.50% respectively, closing at N11.70 and N1.85per share, purely on price markdown for dividend and selloffs.

Market Outlook
We expect the trend to continue as players digest CPI data and TB rates ahead of MPC meeting and more more earnings reports in the midst price markdown for dividend. Income investors target dividend paying companies and defensive stocks to protect their portfolios ahead of the governorship election and post dividend adjustment. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

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