2022 Trading Begins On Positive Sentiments Ahead Of Earnings Season, BUA Listing

Market Update for January 4,

Nigeria’s equity market started the new year on a positive note after the holiday, extending the sentiments of the final trading day of 2021, with the key performance NGX All-Share Index closing higher on a buying pressure across the high, medium and low cap stocks.  This occurred as market players positioned for dividend paying stocks ahead of Q4 unaudited accounts and 2021 full-year financials, along with surprises in form of rewards for shareholders. 

Trading metrics for the session revealed investors’ buying interests in BUA Cement, Stanbic IBTC, Flour Mills and others, which pushed the market indicators up, sustaining the bull transition, despite the fact that most of the institutional investors or fund managers are still in the holiday mood. Also on Tuesday, traders took profit in Vitaform, regardless of the impressive growth in its dividend of N1.50 and the payout ratio for 2021.

During Tuesday’s outing, financial stocks witnessed a mixed sentiment on profit-taking and buying interests, especially banking equities, while foreign investors buying interests in Airtel Africa, GTCO, Seplat Energy, and Nigerian Breweries. Also, there was demand for Lafarge Africa,  NGX Group, Neimeth International Pharmaceuticals, Ecobank Transbational Incorporated and BUA Cement, while bids in  MTNN, Dangote Cement and Dangote Sugar were weak during the day.

Technically, the NGX index’s action extended its recovery as revealed by the candlestick at the end of the day’s trading as investors sentiment rose, closing the session above the 20 and  50-Day Moving Average. Momentum indicators for the day were mixed, just as the ADX is reading 20.81, RSI above 50 at 60.81 and Money Flow Index looking up at 50.72 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds into the equity space as fixed income market yields direction remains unclear and flat. 

Meanwhile, Tuesday’s trading opened slightly on the upside and oscillated to retrace up for the rest of the day on the demand for BUA Cement and Stanbic IBTC, which pushed the NGX index to an intraday high of 43,052.31 basis points, from its low of 42,651.37bps. Thereafter, the index closed above its opening point at 43,026.23bps.

Market technicals were positive and mixed, with volume traded lower than the previous day’s in the midst of negate breadth and buying sentiment as revealed by Sentiment Report showing 93% buy position and 7% sell volume. The total transaction volume index stood at 0.72 points, just as momentum behind the day’s performance remained relatively weak. Money Flow Index was up at 50.72 points, from the previous day’s 41.80points.  

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Index and Mkt Cap Movement 

NGX All Share index, at the end of Tuesday’s session, gained 309.79 basis points, at 43,026.230bps after opening at 42,716.44bps, representing a 0.73% growth, just as market capitalization rose  by N886.76bn, closing at N23.18tr, from the opening value of N22.30tr, representing 3.32% in value gain as a result of the listing of  18bn  shares of BUA Foods at N40 each.

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The session’s upturn was driven by buy interests in BUA Cement, Flour Mills, Lafarge, ETI, Stanbic IBTC and Zenith Bank, among others, which impacted positively on Year-To-Date gain of 0.73%. Market capitalization growth stood at N886.76bn YTD, representing a 3.03% to start the year.

Bearish Sector Indices 

Performance indexes across the sectors were mixed, as the  NGX Industrial goods and Banking indexes that closed 2.97% and 0.39 higher, while the NGX Consumer Goods led the decliners, after losing 0.92%, followed by   Oil/Gas and Insurance  with  0.50% and 0.43% respectively.

Market breadth was negative as losers outnumbered gainers in the ratio of 27:18, while activities in volume and value terms were significantly mixed  as investors exchanged 216.85m shares worth N9.88bn, compared to the previous day’s 455.71m units valued at N1.52bn. Volume was driven by trades in Chams, Wema Bank, Zenith Bank, Transcorp and Sovereign Trust Insurance.  

Academy Press  and Wema Bank  were the best-performing stocks after gaining 10% and 9.72% respectively, closing at N0.55and N0.79 per share respectively on  market forces. On the flip side, Vitafoam and Ardova lost 10% each, closing at N20.50 and N11.70 per share, purely on profit taking.

Market Outlook

We expect a mixed trend as repositioning in dividend paying stocks ahead of  2021 Q4 and full year unaudited earnings reports start rowing in any moment from next week. Just as two companies that made their corporate actions available to the market grew their dividend payout to reflect the numbers posted.  Also, inflow into equity space is looking up slowly on changing investment decision to keep this trend ahead of new year holiday.  As market players digest economic data and happenings in fixed income market after the NGX index action retraced to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and seasonality likely to influence stock prices ahead of year-end window dressing.

The relatively low volume traded in the midst of retracement is creating new buy opportunities on the strength of the Q3 numbers. 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

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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