Blue-chip Gains Lift NGSE Indicators, As Investors Worth Soars 51% YTD

Market Update for December 23

Equity prices opened modestly high on the Nigerian Stock Exchange (NSE) at the midweek, reflecting the continued indecision among market players as sentiments for low priced stocks waxed strong into h late afternoon. This was before the last minutes rally by Airtel Africa and BUA Cement on high demand that pushed the benchmark All-Share index up for the eighth successive session on huge traded volume and positive sentiments.

The positive sentiment and buying interests in stocks across board propelled the index action to break out the major resistance levels of 38,000 basis points mark and 38,669.23bps, just as market capitalization crossed the N20tr mark for the first time in the history of the nation equity market, signaling some form of economic recovery. The market rally continues to accelerate recently into the seasonal trend expectation even as additional stocks supported the Santa Claus rally, with the index trading above all the moving averages on the daily and weekly chart to indicate the presence of smart money.

Also during the midweek’s session, Money Flow Index revealed the entrance of more funds into the market, as the composite index hit a new year-high while investors targeted value and growth stocks while riding with the trend. Like every smart investor, ensure that our Investdata 10 golden stocks for 2021 are in your portfolio, at this time more stocks are revealing a bullish base. These are stocks expected to drive the NSE’s ongoing V-shaped market recovery.

However, we must warn at this point, that investors should not underestimate the possibility of market correction any time soon, because profit-taking is inevitable, even while the market has a trading pattern that supports an uptrend.

The summary is: anything is still possible, considering the prevailing trade pattern as the index rally outside the upper limit of the Bollinger band. 

Meanwhile, Wednesday’s trading opened flat and was sustained till late afternoon, before rebounding on buying interests in telecoms, industrial, consumer goods and banking stocks, a situation that pushed the NSE index to an intraday high of 38,803.74bps, from the 37,893.41.40bps it opened on a positive breadth.

Midweek’s market technicals were positive and strong, with volume traded higher than the previous day’s in the midst of breadth that favoured the bulls on a high buying pressure as revealed by Investdata’s Sentiments Report showing 99% ‘buy’ volume and sell position of 1%. Total transaction volume index stood at 0.98 points, just as the momentum behind the day’s performance was relatively weak, with Money flow index looking up to at 62.55pts, from the previous day’s 55.98pts, an indication that funds entered the market as funds are looking for higher returns and yields.

Index and Market Caps

The key performance NSEASI closed for the day with 910.13 basis points gain, after opening at 37,893.61bps representing a 2.40% growth, just as market capitalization rose by N475.69bn to N20.28tr, from N19.81tr, also representing 2.40% value gain in investors’ portfolios.

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The day’s uptrend was attributed to demand for Airtel Africa, BUA Cement, Nigerian Breweries, Guinness, Lafarge Africa, UBA, UACN, United Capital, Vitafoam and Eterna, among others. This impacted positively on Year-To-Date gains, as it rose to 44.56%, just as YTD gain in market capitalization soared to N7.32 trillion, representing a 51.03% growth.

Mixed Sector Indices

The sectorial performance indexes were largely bullish, except for NSE Insurance that   closed 0.81% lower, while NSE Industrial Goods led the advancers after gaining 3.10%, followed from afar by Banking and Consumer Goods that closed 0.18% and 0.15% higher respectively.

Market breadth was positive, as advancers outnumbered decliners in the ratio of 26:7; activities in volume and value terms were up by 238.56% and 82.24% respectively as stockbrokers traded 1.5bn shares worth N18.75bn from the previous day’s 442.22m units valued at N10.29bn. Volume was driven by Veritas Kapital, Flour Mills, BUA Cement, Zenith Bank and Mansard Insurance.

ABC Transport and Japaul Gold were the best performing stocks during the session, gaining 10% each, to close at N0.33 and N0.44 per share, on market sentiment. On the flip side, FCMB and PZ lost 3.97% and 3.64% respectively, at N2.90 and N5.30 per share, on profit taking and market forces.

Market Outlook

We expect this trend to continue on buying interests in highly capitalized stocks that control 70% of the market cap, despite the cautious trading as other stocks that drive the Santa Claus rally are waking up in terms of price appreciation ahead of year end window dressing. There is also the interplay of market forces, as traders and investors interpret the impact of funds rotation and the current happens globally. Investors should, at this point, target solid stocks selling at discount in the midst of the ongoing cautious trading, portfolio diversification ahead of seasonal trends and expectations.

A breakout of 36,000 points will confirm a new uptrend as the market awaits the circular flow of funds to settle in higher yields instruments with a shorter timeframe, while waiting to see the impact of the adjustment in CBN policies. A breakout of this resistance level will create buy opportunities for discerning traders and investors.

Also important is the fact that technical indicators reveal overbought on the weekly and daily chart, while RSI reads 70 points and above, a situation that supports the likelihood of another correction.

However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by the quality of Q3 earnings presented, especially by the tier-1 banks, even as analyses of numbers released so far have helped repositioning of investors’ portfolios on the strength of sectoral and company’s performances.

The NSE’s index action and indicators are looking up in the same direction on a very high traded volume and positive buying sentiments.

Again, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation in the rest of the year.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08032055467