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Earnings driven Bull Transition still intact

The ongoing bullish rallyis no doubt unprecedented and beyond analysts’ expectation; consistent amidst weak macro-economic variables and political uncertainties. Expectedly, traders and investors are positioning

for the earnings season that had commenced earnestly with better than expected numbers and corporate actions released so far.

Historically market’s performance in the month of March has been unsteady and largely negative since 2005 in terms of monthly returns regardless of being the peak month for earnings season for major listed companies’e.g in Financial service sector, Oil and Gas, Consumer Goods, etc.

In the last decade, the negative trend of the market composite index  ASI in the month of March that was basically driven by the strength of corporates numbers and actions released by companies at these periods, sectoral policies/reformsby the regulators and other macro-economic indicators like the interest rate, exchange rate, crude oil price and receipts, polity stability, among others.

Looking at the chart, the short term bullish run is still strong as 7, 14 and 45 days moving averages cross each other below the price to support market rally on relative attractive valuations.

 


The downside risks to the bullish rally remain but not limited to the following

 •The forthcoming general presidential election with associated social unrest (pre and post-election)

 •Early profit booking by speculators given the recent uptrend in equity prices

 • Flight to safety by institutional and foreign investors in the face of heightened political risks

 •  Weak macroeconomic variables and delayed growth necessitated by dropping value of Naira and  crude oil revenue

 •  Insecurity inhibiting companies market penetration and operations in the troubled regions etc


We advise investors to generally remain cautious and accumulate in tranches fundamentally strong companies with good potentials and impressive dividend payout history and that are currently trading below their intrinsic values with strong upside potentials in the near-medium term horizon. We expect these equities to hold forth the bullish rally and quick to recover in a bearish rally on good dividend yield and positive investors sentiments.  If you are trading let the market movement in the table guide your stay.

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