Bull-run Pushes NGX Index Near Historic High, Amid Oil Price Rally, Positioning For Dividends

Market Update for January 19
Bargain hunting on the Nigerian Exchange at the midweek sustained its positive outing for the second consecutive session, as the benchmark NGX All Share Index closed significantly higher but still on a low traded volume and slightly negative breadth, driven by demand for high cap and dividend paying stocks.

The market broke out its five-year and 2018 strong resistance level to record a new 52-week high on improved volume traded and positive sentiment, extending the new trend and characteristics that support an uptrend.

The index action now looks to the 2008 all-time market high.
The positive sentiment recorded during the session is attributable to position taking across sectors, especially in telecoms, oil and banking, ahead of the earnings reporting season.

Already, transaction volume and price action reveal the presence of buyers in the market. Also, the prevailing low volume of transactions on the exchange indicates the absence of institutional players, despite the positive fundamentals and technical patterns that reveal the undervalued state of many stocks and buy opportunities available in the market.

Meanwhile, as the market broke out its recent resistance level of 44,768.94 basis points to attain a five-year high, driven by price appreciation in Airtel and Seplat Energy, boosted market performance in the face of rising oil prices at $88.22 per barrel.

This expected to further enhance Nigeria’s foreign reserves and market fundamentals. These and dividend positioning supported the minor breakout in Access Bank, Dangote Sugar, Eterna and Guinness, besides the ongoing accumulation in Sterling Bank, Neimeth Pharmaceuticals, Dangote Sugar, Ecobank Transnational Incorporated, Eterna, UBA, and Zenith Bank.

Already, Dangote Cement was among the top traded stocks at the midweek ahead of Thursday’s share buyback programme expected to boost value and create more liquidity in the market and value for shareholders, as the share price remains around its fair value of N295 per share, just as this move is expected to support higher earnings per share.
Technically, the NGX index’s action had sustained its uptrend on a low traded volume to continue its recovery, as discerning investors reposition their portfolios ahead of earnings releases.

Also, the first unaudited Q4 and full-year earnings reports from Infinity Trust Mortgage hit the market in the midst of MPC meeting outcome next week. Trade metrics and candlestick at the end midweek’s trading revealed positive sentiments that supports an uptrend, as the NGX index traded above the 20 and 50-Day Moving Average. Momentum indicators for the day were strongly positive, just as the ADX read 38.04, RSI closed above 50 at 78.65 and Money Flow Index read 79.48 points on the daily chart.

The continuation of this trend depends largely on the interplay of market forces and flow of funds into the equity space, as the fixed income market yields direction remains unclear, with inflation on another uptrend at 15.63%.
Midweek’s trading opened in the upside and oscillated before retracing up sharply on buying interests in Telecom, energy and financial stocks that pushed the key performance index to an intraday high of 45,430.40 basis points, from its lows of 44,352.61bps. Thereafter, the index closed above its opening point at 45,430.16bps.
Market technicals were positive and strong as volume traded was higher than the previous day’s in the midst of negative breadth and positive buying sentiments as revealed by Investdata’s Sentiment Report showing 100% buy volume. The total transaction volume index stood at 0.74 points, just as the energy behind the day’s performance remained strong. Money Flow Index was up at 79.48points, from the previous day’s 75.70points.  
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Index and Mkt Cap Movement 
The composite index, at the end of the day’s trading gained 774.25 basis points, at 45,430.16bps, after opening at 44,655.89bps, representing a 1.73% growth. Market capitalization rose by N417.16bn, closing at N24.48tr, from the opening value of N24.06tr, also representing 1.73% value gain.

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Wednesday’s upturn was driven by position taking in Airtel, Seplat, Access Bank, Zenith Bank, UBN, May/Baker, NEM Insurance and GSK, among others. This impacted positively on Year-To-Date gain which rose to 6.35%. Market capitalization growth stood at N2.20tr YTD, representing a 7.98% from the opening level for the year.

Bullish Sector Indices 
Performance indexes across the sectors were up, except for the NGX Consumer Goods that closed 0.02%lower, while the NGX Oil/Gas index led the advancers, gaining 2.21%, followed by Insurance and Banking with 0.59% and 0.50% respectively. While industrial goods closed flat.

Market breadth turned slightly negative as losers overtook gainers in the ratio of 17:16, while transactions in volume and value terms were up after investors exchanged traded 252.94m shares worth N8.93bn, compared to previous day’s 235.23m units valued at N1.91bn. Volume was boosted by trades in GTCO, Dangote Cement, FBNH, Fidelity Bank and FCMB.

Airtel Africa and Cornerstone Insurance were the best performing stocks for the day after gaining 10% and 6.30% respectively, closing at N1,155.50 and N0.53 per share respectively, on market sentiment and earnings expectations. On the flip side, FTN Cocoa and Consolidated Hallmark Insurance lost 7.69% and 7.25% respectively, closing at N0.36 and N0.64 per share, purely on profit taking.

Market Outlook
We expect a mixed sentiment on Dangote Cement’s buyback and profit taking, as rallying oil price support economic and market fundamentals. Also, investors are targeting dividend paying stocks as they reposition portfolio ahead of 2021 Q4 and full-year audited earnings reports that may start hitting the market any moment from now.

With all eyes on MPC meeting outcome, as inflation reversed up to 15.62% and other economic data. Also noteworthy is the oil price that remains above $74 projection of IMF at $88.22, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.

Already, two companies made their corporate actions available to the market, announcing a growth in 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 up to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and the new January Effect pattern likely to influence stock prices ahead of 2021 earnings reporting season.

The relatively low volume traded in the midst of uptrend and recovery moves are 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
Tel: 08028164085, 08179547605

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