Mixed Sentiments, More Dividend Inflow, As Investors Bet On MPC Outcome

 

Market Update for the Week Ended March 18 and Outlook for Mar 21-25

Equity prices on the Nigerian Exchange last week closed lower on a very high traded volume and mixed sentiments, suggesting that some investors are still taking profit in fundamentally sound stocks yet to release their audited full-year 2021 accounts, even when their Q4 unaudited numbers have given insights into the likely dividend payout. This is aside from fearful players exiting their position by engaging in panic selling, a situation that pulled the market down to reveal a bearish behaviour or psychology.

Last week’s pullback in the midst of continued volatility and sideways movement signals the wait-see-attitude of investors, which may account for the fact that the impressive earnings and high payout so far announced by some listed companies are yet to have much impact on the market and individual stocks, notwithstanding the strong numbers released so far. This was even as many of those companies that released their unaudited accounts in January have started notifying the investing public of board meeting for final approval of their 2021 year-end corporate actions and possibility of bonus as a result of the new rule in the Companies & Allied Matters Act requiring companies to recapitalize their outstanding authorized share capital on or before December 31, 2022.

With the ongoing war in Ukraine remaining a source of significant risk to trading and investing in the global stocks and commodities markets, coupled with the rise in imported inflation in the domestic economy as reflected in the consumer price index which hit 15.70% at the end of February. Investdata, therefore, believes that it could be suicidal at this time for any trader or investor to joke with his/her stop-loss while executing trade plans. One thing in stock markets that is consistent is change, and over the past three weeks we have seen how the global trend has influenced our market negatively, ahead of the Central Bank of Nigeria (CBN) two-day Monetary Policy Committee (MPC) meeting which opens on Monday. Also, we note that the market gradually approaches the peak period for December year-end stocks and deadline for submission of the 2021 audited financials, as well as the quarter-end window dressing. So your trading strategies must change if you must stay ahead of the market and profit from current market condition, while protecting your trading capital, or investable fund.

The seesaw movement so far witnessed in the market requires proper technical analysis tools for timing your trades to avoid exposing your funds to avoidable risks. Your investment time frame should determine the multiple time frame or chart you deploy when charting to take a decision. Buying into the strong group of stocks and sectors at the right time makes the difference in your portfolio and help you to build wealth consistently in any market situation.

The trading strategies that will help you to navigate this current market trend include: Learning and understanding how to use specific technical analysis tools. Investdata Technical Tool Box makes it easier for you to understand and use them effectively to enhance your trading results and bottom-line. Try and get them, if you have not made an order.

Despite, the pullbacks witnessed during the week, the share prices of the following stocks Presco, UACN, FCMB, PZ, and NPF Microfinance, among others, hit new 52-week highs.

Movement Of NGXASI

The bears dominated trades in the week under review, as the NGX index recorded four trading sessions of down market and one up day to reverse the previous positive outing, after opening the week on a negative note, losing 0.01%, which short-lived the previous Friday’s buying interests that lingered until Tuesday when the index fell by another 0.24%. The trend was halted at the midweek when the market gained 0.05% on renewed buying interests, but was halted on Thursday and Friday when the index lost 0.02% and 0.15% respectively. This brought the week’s total loss to 0.33%, compared to the previous week’s gain of 0.36%.

In all, the key performance index recorded a 154.81 basis points loss, closing the week at 47,282.67bps, after touching an intra-week low of 47,221.34 points, and a high of 47,466.61bps. Recall that the week opened with the index at 47,457.48bps, just as market capitalisation fell by N82bn, closing at N25.48tr, from the previous week’s N25.67tr, which also represented a 0.33% value loss.

Despite the pullback during week, the medium and low cap stocks dominated the top advancers table, as market news and dividend expectations continued to drive demand for some stocks, as players took advantage of the ongoing corrections to buy into the better-than-expected numbers that hit the market.

We note that economic data and corporate earnings released during the week, did not impact the NGX All-Share Index owing to more selling activities than buying interest, a situation that was reflected in major sectoral indexes which closed lower. This followed the losses suffered by MTN Nigeria, NB, Zenith Bank, Access Bank, MRS Oil, and others, dragging the market down on a high traded volume.

Market breadth for the week turned negative due to profit taking and selloffs ahead of more corporate actions, the MPC meeting and end of the month/quarter window dressing activity by fund managers and other. This is likely to support the recovery in the short to long-run, while investors increased their positions in the hope of higher dividend payouts and yields.

During the week, losers outnumbered gainers in the ratio of 21:45 on selling sentiments, as revealed by the investor sentiment report showing 25% ‘buy’ volume and 75% sell position. Money Flow Index, however, declined to 68.89bps from the previous week’s 69.26 points, an indication that funds left the market.   

The NGX’s index action sustained an up market on a weekly time frame, despite the sideways movement after pulling back on a selling sentiment to trade on top of the seven-day moving average and above the 47,000 points to test the 47,466.61 basis points. The candlestick formation, at the end of the week showed that sellers are in charge at a time the release of more 2021 audited financials is expected to give a direction. The candlestick pattern indicates a possible continuation of the trend, depending on market forces in the new week. Meanwhile, market recovery is still strong. Also, all eyes are on the fixed income market yields and oil prices to further support market fundamentals and attract liquidity to the equity space. The NGX at this point is creating new buying opportunities for dividend income investors.

Bearish Sectoral Indices

The sectorial performance indexes for the week were down, except for the NGX Industrial Goods that closed 0.14% higher, while the NGX Oil/Gas led the decliners after losing 3.87%, followed by Insurance, Consumer goods and Banking with 2.93%, 0.43% and 0.17& respectively.

Activities in volume and value terms were lower as market players traded 2.45bn shares worth N20.65bn, compared to the previous week’s 2.80bn units valued at N23.86bn. This volume was driven by Financial Services, ICT and Conglomerates industry stocks, FCMB, Etranszact, Fidelity Bank, Access Bank and Transcorp.

PZ Cussons and UACN were the best-performing stocks for the week, gaining 17.01% and 14.55% respectively, closing at N8.60 and N12.20per share respectively on earnings expectation and market forces. On the flip side, Cornerstone Insurance and SCOA lost 21.62% and 15.90% respectively, at N0.58 and N2.38 per share, purely on profit-taking and selloffs.

Outlook for the week

We expect mixed sentiments in the new week, as all eyes are on outcome of MPC meeting holding Monday and Tuesday, in the midst of expected more dividend announcements and audited earnings reports hitting the market, Also, investors and traders continue  reacting to numbers, as investors revalue listed companies through their earnings performance and power. We note that income investors continue buying into dividend-paying stocks,

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Sub-Topics

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B. Technical Tools As Timing Edge To Manage Volatility Risk & Identify Buy Opportunities, Mr Abdul-Rasheed Oshoma Momoh, Head Capital Market at TRW Stockbrokers Ltd 

C. The Power of Earnings in a Post Pandemic Shift & Political Uncertainty, Mr Ambrose Omordion, Chief Research Officer, Investdata Consulting Ltd

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5. Hot stocks to deliver 2-time inflation rate returns and gains in 91 days

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