Bull Trend Still, But Investors Bet On December Inflation Data, MPC Outcome, Amid Election Worries
Market Update for January 12
Equity prices closed higher on the Nigerian Exchange on Thursday in the midst of an uptrend continuation and mixed sentiments, as momentum remains strong on a positive market breadth and low traded volume ahead of the December inflation data release, as well as expectations for Q4 financials. The benchmark NGX All-Share index extended its bull transition for the second successive session on increasing buying interests and expected corporate actions.
The candlestick formation at the end of Thursday trading as revealed by index action signaled a fake markup, that suggest wait and see trend reversal or continuation as market opens today, depending on market forces, despite the NGX index breaking out the 52,000 psychological line to test 52,495.10 point before pulling back in the face of increasing inflow of fund in equity space and more companies notifying the investing public of its closed period and board meetings.
However, market players had continued to bet on the expected outcome of the first meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) for the year, and the changing yield environment in the fixed income market as revealed by the outcome of TB primary market auction rates and yield which had suffered another decline across all tenors, to support flow of funds into equity space on the strength of high dividend yields in a shorter time frame.
Demand for value and dividend paying stocks across the major sectors of the market has continued to support the recovery as revealed in the short, medium and long term trend, thereby signaling the possibility of sustaining this trend for the rest of the month. This is hinged on the declining rates in the face of rising inflation and expected full-year earnings and corporate actions that would support price, notwithstanding profit taking. These are notwithstanding uncertainties associated with the coming 2023 general elections going on as planned, beginning from February 25, 2023, and a possible post-election rally, all things being equal. The change in market structure due to the low participation of foreign investors post COVID-19 has supported the recovery for three years.
The NGX trading above the 200-Day Moving Average on the daily and weekly time frame in the midst of volatility and mixed sentiments, were as a result of continued bargain hunting activities in value stocks at their current prices ahead of the NGX’s historical peak of earnings reporting season that comes with dividend rewards, more liquidity, buying interest, earnings surprises and disappointments.
Technically, the NGX index’s action is still in its marketup phase in the face of a topping chart, cup and handle pattern that supports reversal or continuation of trend on a daily and weekly time frame, as MACD signal line and histogram at the end of day trading on a dally chart supports reversal of trend and bearish divergence. Despite position taking that hit some industrial, telecoms and banking stocks. let us keep our gaze on market forces and money flow.
Technical indicators appear to remain stronger, as revealed ADX reading 65.74, just as, RSI and Money Flow Index are looking up to read 77.27 and 83.52 points against the previous session 75.51 and 83.03 points respectively. Volume trading pattern suggests the gradual return of many players who had been seating on the fence before now, including institutional investors holding cash before now to confirm the primary’s market direction, especially given the anticipated financial market and economic reset in 2023, that comes with huge opportunities to create wealth for smart investors and traders.
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Oil price oscillation continued, as it trades at $83.69 per barrel on slide in US inflation data and China economic reopening in the midst of cases of Covid-19 in China, geopolitical tension and fear of climate change. Also, due to high interest rate and inflation across the globe. Also, supply tightened due to the Russia-Ukraine war that has lingered so far. The up and down movement of oil price also continues to drive volatility.
Meanwhile, Thursday’s trading opened slightly on the downside before rebounding at midday, oscillating for the rest of the session due to position taking and selloffs in some highly, medium and low cap companies, a situation that pushed the NGX’s index to an intraday high of 52,495.11 basis points from its lows of 51,696.17 bps before closing sharply above its opening level at 52,048.85bps.
Market technicals were positive and mixed, with lower volume of trade compared to the previous session in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 44% buy position and 56% sell volume. The total transaction volume index stood at 0.98 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 83.57pts, from the previous day’s 83.03pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Thursday, the NGX All Share Index gained 318.85 basis points, closing at 52,048.85bps after opening at 51,729.74bps, representing a 0.62%, just as market capitalization rose by N173.74bn closing at N28.35tr from the previous day’s N28.19tr, which also represented a 0.62% value gain.
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The session’s upturn was driven by demand for shares of MTNN, Dangote Sugar, Ardova, GTCO, PZ, ETI, Accesscorp, GSK and UPDC, among others, which impacted positively on Year-To-Date gain of 1.56%. Market capitalization YTD gain stood at N426.88bn, representing 1.56% above its opening level for the year.
Bullish Sector Indices
Sectorial performance indexes for the session closed in the green, NGX Banking led the advancers after gaining 2.15%, followed by Consumer goods, Insurance, Energy and Industrial goods with 0.74%, 0.55%, 0.54% and 0.18% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 35:8; whereas activities in volume and value were down, after stockbrokers traded 211.74m shares worth N7.73bn. Volume was driven by trades in Marsand, gtco, Chams, Royal Exchnage and FBNH.
Lasaco and Ellah Lake were the best performing stocks, after gaining 10% each, closing at N1.10 and N3.96 per share respectively on market forces. On the flip side, Abbey Building and FTN Cocoa lost 10% and 3.57% respectively, closing at N1.53 and N0.27per share, purely on selloffs.
We expect positive sentiment and mixed trend on profit taking as investors position ahead of Consumer price index data and Q4 earnings reports in the face of election uncertainty, as pullback at this point may add more strength to upside potential. As such, investors should take advantage of price correction buy value. Also looking at the trends and events across the globe and national.
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