Earnings To Determine NGX Direction, As Investors Bet On Q4 Reports, MPC Outcome

Market Update for the Week Ended January 14 and Outlook for January 17-21

The bull sentiment and momentum continued in the second trading week of the new year, and despite the mixed trend and performance recorded, it closed the period higher on a less than average traded volume and negative breadth to reflect profit-taking by short-term traders in the market.

There was profit booking in highly capitalized stocks that just rallied recently, as investors positioned in dividend paying companies ahead of the expected unaudited Q4, and full-year 2021 corporate actions that will keep the momentum intact.

Also noteworthy was the announcement of Dangote Cement’s share buyback that triggered buying interest again 8n the stock as earnings season draws closer, despite experiencing profit-taking. This transaction would further create liquidity in the market, boost appetite among investors, as well as investors sentiments.

Also, the recent listing of BUA Foods has sustained the positive investors’ vibes, and at the same time justifying our hope for the January Effect rally as the NGX All Share Index recording 4.07% year to date gains, ahead of the December consumers price index and other macroeconomic data that would reveal the state of the economy.
Despite, the profit-taking and selloffs that just resurfaced on the exchange at the end of last week’s trading.

There is always a bull sector or market somewhere, even when stocks are witnessing selloffs everywhere else. There will be money to make somewhere. If the NGX is down, one sector might be up, but these things don’t just change every day.

They go in trends and sector management or rotation is the key to finding the best stocks and sectors that will go up, not just for a day or week, but for months and years.

How does it work, because 80% of gains come from being in the right sector, while another 80% of the gains from a stock is made because of the sector it is in.? The more a sector gets into favor, the higher the PE ratio in that sector. That is why market correction, or pullbacks are always as much as 35 to 50% sometimes.

It’s because PEs really reflect price. The PE of many stocks today are below 15, suggesting that these stocks have high upside potentials. As the state of the expected corporate numbers, actions and economic data would determine how far stock prices will go and payout.

During the week, the following: Airtel, United Capital, PZ, Royal Exchange Assurance and others hit new 52-week high. So, to navigate the new year profitably, order for Investdata’s video on Technical Toolbox for Buy & Sell Decision Home Study Pack to enhance trading results and boost your bottom line. Also, to up your game in stock trading and investing, understanding the key to trading price and index action will go a long way to make the difference in your trading results, checkout the video materials below

Movement Of NGXASI
It was a mixed week for the NGXASI after recording two sessions of up market and three days of loses, as the composite index opened the period on a positive note gaining 0.10%, and extending the previous bull sentiment, but it slipped marginally on Tuesday as profit taking hit the market after rallying for some days. By midweek, the market rebounded sharply on buying interests in Dangote cement, following announcement of its second stage of share buyback, and positive sentiment for telecoms giant MTNN which pushed the index up to 1.71%. This was followed by a pullback on resurfaced profit booking on Thursday and Friday, when the index lost 0.01% and 0.34% respectively, bringing the week’s total gain to 1.37%, compared to the previous week gain of 2.66%.

Therefore, overall, the Year-to-Date returns printed at 4.07%.
Consequently, the key performance index grew by 600.25 basis points, closing the week at 44,454.67bps, after touching an intra-week high of 44,621.70bps from its lows of 43,854.40bps, after the period opened at 43,854.42bps on a mixed momentum and buying interests in dividend paying stocks.

Market capitalization rose by N323 billion, closing at N23.951tr, compared to the previous week’s N23.630tr, which also represented a 1.37% value gain. After it had hit N24 trillion market cap.

The week’s top gainers’ table was dominated by combination stocks that had become the toast of investors, as traders booked profit from the recent rally.

This was in the midst of continued portfolio repositioning on the strength of Q3 earnings reports, sectorial fundamental news and positive economic data.

We note that the NGX Index and price actions reveal the presence of buyers in the market, a situation that reflected on major sectoral indexes, just as losses in Nestle and price adjustment in PZ for its 25 kobo dividend that depressed the Consumer Goods index.

Market breadth for the week was slightly negative on a light volume as a result profit taking during the week, just as players expect historical trend patterns of January to support the recovery in the short to long-run, while investors increase their positions on dividend yields.

Decliners outnumbered advancers in the ratio of 35:33, on buying sentiment as revealed by investors’ sentiment report showing a 78% buy volume and 22% sell position. Money Flow Index rose to 76.80bps from the previous week’s 76.78 points, an indication that funds entered the market.


NGX index action, on a weekly chart maintained a bullish channel and pattern, as it is set to breakout a major resistance of 44,663.90, just as the candlestick formation at the end of the week revealed a strong bull position on a less than average traded volume in the midst of buying sentiment at a strong resistance level.

The candlestick pattern indicates a positive outing, and that the market recovery is still strong despite the pullback witnessed during the week. Also, with all eyes on fixed income market yields and oil prices to further support market fundamentals and attract liquidity to the equity space. The NGX at this point is creating new buying opportunities for discerning players.

Mixed Sectoral Indices
Performance indexes across the sectors were mixed, as the NGX Industrial Goods, Energy and Banking closed 3.56%, 1.74% and 0.75% higher respectively. The NGX Consumers Goods led the decliners after losing 4.35%, followed by Insurance index with 1.54%.

Activities in volume and value terms fell as stockbrokers traded 1.6bn shares worth N32.72bn, compared to previous week’s 2.03bn units valued at N59.01bn. Volume was driven by Financial Services Conglomerates and Consumer goods, particularly Transcorp, BUA Foods, Jaiz Bank, FBN Holdings and GTCO.
BUA Foods and Transcorp were the best performing stocks for the week after gaining 24.06% and 16.33% respectively, closing at N66.00 and N1.14 per share respectively on market sentiment/ forces and earnings expectation. On the flip side, SUNU Assurance and Mutual Benefits Assurance Plc lost 16.22% and 12.90% respectively, at N0.31 and N0.27per share, purely profit taking.

Outlook for the week
We expect a positive sentiment on dividend paying stocks to continue in the midst of profit taking as investors and bargain hunters position ahead of January historical trends and earnings expectation.

It is also noteworthy that funds and portfolio managers continue to take position on the strength of Q3 numbers ahead of 2021 financials. For now, many stocks remain within their buy ranges to attract funds into the equity space. Also, investors will continue tracking yields movement in the fixed income market.

Last week low volume suggests that institutional investors are not selling. It is noteworthy that oil price has continued to oscillates in the international market to trade above $80; corporate actions, as well as the Q4 unaudited numbers are around the corner

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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605