Bull Trend May Linger On Dangote Cement Buyback, Repositioning In Dividend Stocks

Market Update for January 12
The bulls resurfaced powerfully on the Nigerian Exchange at the midweek knocking off the bears, and halting the previous session’s selling pressure, on demand for blue chip stocks and the Planned resumption of share buy-back by Dangote Cement. This triggered buying interestsbin the market again as earnings season draws closer.

The Dangote Cement transaction is expected to further create liquidity, boost investors’ appetite and sentiments, helped by the recent MTNN offer for sale and listing of BUA Foods that sustained the positive market breadth, and, at the same time justifying our call on the January Effect rally.

The NGX All Share Index has recorded 4.43% year to date gain ahead of Inflow of the 2021 financials of listed companies.

Trading metrics for the session showed strong buying interests among highly capitalized equities and dividend paying stocks, despite the first NTB auction for the year. This was just as oil prices continued to tick up, trading above $82 0er barrel to support market fundamentals and the nation’s external reserves.

Valuation-wise the market’s P/E ratio and dividend yield currently stands at 6.7x and 6.6% respectively to reveal the profitability potential of the nation’s equity market for discerning investors and traders.

Technically, the NGX index’s action rebounded sharply at the midweek on a low traded volume to signal continuation of the bullish pattern and the ongoing recovery moves as revealed by the candlestick at the end of the day’s trading, to trade above the 200 DMA as 20DMA cross the 50-Day Moving Average from below to signal buy opportunity in the market.

Momentum indicators for the day were positive, as the ADX read 30.85, RSI closed above 50 at 75.50 and Money Flow Index looks up read 67.65 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, but flat.

Meanwhile, midweek’s trading opened slightly in the downside before rebounding in the midmorning on the back of position taking in Dangote Cement and MTNN among others, which pushed the NGX index to an intraday high of 44,609.24 basis points, breaking out the recent resistance level of 44,345.64 on a light volume from its lows of 43,858.36bps.

Thereafter, the index closed significantly above its opening point at 44,608.83bps.
Market technicals were positive and mixed as volume traded was lower than the previous day’s in the midst of positive breadth and buying pressure as revealed by Investdata’s Sentiment Report showing 100% buy volume.

The total transaction volume index stood at 0.72 points, just as the momentum behind the day’s performance remained relatively strong. Money Flow Index was up at 67.65points, from the previous day’s 66.70points.  

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Index and Mkt Cap Movement 
At the end of the session, the composite NGX All Share Index gained 749.52 basis points, at 44,608.93bps, after opening at 43,859.30bps, representing a 1.71% growth. Market capitalization rose by N403.83bn, closing at N24.03tr, from the opening value of N23.63tr, also representing 1.71% appreciation in value.

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Midweek’s upturn was attributed to buying interests in Dangote Cement, MTNN, BUA Foods, Seplat Energy, PZ, Guinness, and UBA, among others.

This impacted positively on Year-To-Date gain which rose to 4.43%. Market capitalization growth stood at N2.01tr YTD, representing a 6.20% from the opening level for the year.

Bullish Sector Indices 
Performance indexes across the sectors were up, except for the NGX Insurance index that closed lower by 0.49%, while the NGX Industrial Goods index led the advancers, after gaining 3.06%, followed by Oil/Gas, Banking and Consumer Goods with 1.37%, 0.39% and 0.14% respectively.

Market breadth turned positive as gainers outpaced losers in the ratio of 24:17, while transactions in volume and value terms were down after investors exchanged 266.33m shares worth N3.82bn, compared to previous day’s 294.54 m units valued at N6.77b. Volume was driven by trades in Transcorp, FBNH, Jaiz Bank, Sterling Bank and GTCO.

Academy Press and Jaiz Bank were the best-performing stocks for the day after gaining 10% each, closing at N0.66 and N0.66 per share respectively, on market sentiments and forces. On the flip side, Consolidated Hallmark Insurance and Regency Insurance lost 8.70% each, closing at N0.63 and N0.42 per share, purely on profit taking.

Market Outlook
We expect the prevailing trend to continue on Dangote Cement’s buyback announcement and repositioning in dividend paying stocks ahead of 2021 Q4 and full year unaudited earnings reports that may start hitting the market any moment from now. As all eyes are on December consumer price index and other economic data.

Also noteworthy is the first TB auction in 2022 that is ongoing, as oil prices remain above $82 at the international market, 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