Equities

Expect Mixed Sentiment, On Last Minute Positioning, Bargain Hunting

Market Update for the Week Ended December 17 and Outlook for Dec 20-24

Equity prices on the Nigerian Exchange closed higher at the end of last week, despite witnessing a mixed trend within the period and halting two successive weeks of decline and selloffs, amid the year-end positioning and buying interests in dividend-paying stocks ahead of historical trends and patterns associated with the month of December and year-end.

There were positive sentiments in the midst of recovering momentum, low traded volume, and mixed investors vibes, besides the swing trading pattern experienced within the period leading to minor and major breakouts and down. These saw Dangote Cement, Fidson healthcare, Jaiz Bank, Royal Exchange Assurance, and United Capital Plc recording a breakout of minor and major resistance levels to close higher, while Chemical Allied Products, Etranzact, Nascon, and Union Bank of Nigeria broke down their minor and major support levels, just as the seeming improved inflow of funds into equities as revealed by money flow index on a daily and weekly time frame, resulted from the continued decline in Treasury Bills primary auction rates in the short and long tenored curve of 364 days that slipped further to 5% at the end of the weekly auction.

The week’s trading metrics revealed high profit-taking activities in banking stocks, making them more attractive for market players, especially because they are the most consistent dividend payers in the market, especially now that the year 2021 is winding down. Already, the sector Q3 numbers reveal the undervalued state that supports high payout and upside potential.

Other sectors of the market witnessed high positioning expected to support the ongoing recovery and retracement in the Santa Claus week and end of the year window dressing as the release of unaudited Q4 earnings reports in January adds more momentum to the market at the beginning of 2022. The strength of the recent rally in the major indexes shows just how powerful the bullish trend bias is right now ahead of the Santa Claus rally. Some traders continue to focus on the downside risk associated with the fourth wave of the COVID-19 pandemic, and the accompanying uncertainty in the system. I have, however, continued to focus on the strength of the sectoral indexes in various sector trends that show real opportunities for profits.

During the week also, the National Bureau of Statistics (NBS) released the inflation data for the month of November 2021, which showed that Nigeria’s inflation rate moderated for the eighth consecutive month to 15.40% YoY (by -59bps from 15.99% recorded in October 2021). However, the Headline index increased to 1.08% MoM in November 2021 (by 10bps from 0.98% recorded in October 2021). Likewise, food inflation, the major driver of the headline inflation, dropped to 17.21% YoY (by -1.13ppts from 18.34% recorded in October 2021).
Conversely, core inflation which excludes prices of farm produces increased to 13.85% YoY (by 61bps from 13.24% recorded in October 2021).

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Movement Of NGXASI

The NGX index started the week strong, oscillating and side-trending, as the benchmark All Share Index (ASI) expanded in three sessions, following which it closed 1.12% higher, boosted by buying interests in GTCO, ZENITH BANK, DANGCEM, UBA, STERLNBANK, NB, SEPLAT, FBNH, ETI, GUINNESS and MTNN. Overall, the Month-to-Date and Year-to-Date return printed at -2.07% and +5.17%, respectively.

Consequently, the key performance index gained 470.34 basis points, closing the period at 42,353.31bps, after touching an intra-week high of 42,582.94bps from its lows of 41,816.16bps, after the week opened at 41,882.97bps on positive sentiment and buying interest in dividend-paying stocks. Market capitalization rose by N253bn, closing at N22,107tr, compared to the previous week’s N21.854tr, which also represented a 1.12% value gain.

The top advancers table for the week was dominated by low-priced stocks which had become the toast of investors, alongside the dividend-paying stocks.  This was in the midst of continued portfolio repositioning on the strength of Q3 earnings reports and positive economic data. It is noteworthy that the NGX Index and price actions revealed the presence of buyers in the market, a situation that reflected on major sectoral indexes.

Market breadth was positive for the week, besides the low traded volume and the expected year-end seasonality and historical trend patterns that are likely to support the recovery in the short to long run, as investors increase their positions on a sideways movement. Gainers outnumbered losers in the ratio of 32:28, on positive sentiment as revealed by investors’ sentiment report showing a 70% ‘buy’ volume and 30% sell position. Money Flow Index rose to 67.25bps from the previous week’s 61.39 points, an indication that funds entered the market.

NSEASI WEEKLY CHART MOVEMENT

The NGX index’s action, on a weekly chart, maintained a bullish pattern despite the bearish engulfing candlestick on a low transacted volume in the midst of buying sentiment and reversal moves as revealed by the candlestick at the end of the week’s trading on a strong resistance level. The candlestick pattern indicates a bearish outing and that the market is correcting. 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.

Mixed Sectoral Indices

Sectorial performance indexes were mixed, with the NGX Banking and Energy closing 1.82% and 0.57% lower respectively, while the NGX Consumer Goods led the advancers after gaining 0.63%, followed by Industrial Goods and Insurance with 0.38% and 0.04% respectively. Activities in volume and value terms dropped, as investors traded 1.32bn shares worth N15.33bn, compared to the previous week’s 2.63bn units valued at N26.90bn. Volume was driven by Financial Services, Consumer Goods, and Conglomerates, particularly FBN Holdings, International Breweries, Access  Bank, EIT, and Transcorp.

The best-performing stocks for the week were Meyer and Royal Exchange Assurance which gained 27.27% and 15% respectively, closing at N0.42 and N0.69 per share respectively on market forces. On the flip side, Champion Breweries and UPDC lost 13.65% and 10.17% respectively, at N2.34 and N1.06per share, purely market forces and profit-taking.

Outlook for the week

We expect a mixed sentiment, on last minutes positioning by investors and bargain hunters, ahead of seasonality and historical trends. It is also noteworthy that funds and portfolio managers continue to take position on the strength of Q3 numbers ahead of year-end window dressing. 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’s low volume suggests that institutional investors are not selling. It is noteworthy that oil price has continued to oscillate in the international market to trade above $70; corporate actions, as well as the Q4 unaudited numbers, are around the corner.

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