Expect Mixed Sentiments, Amid Portfolio Realignments, Ahead Of December CPI, MPC Outcome

Market Update for January   11

Buying interests resurfaced on the Nigerian Exchange on Thursday after the previous session’s profit taking, as market players repositioned in the stocks that pulled back ahead of their earnings reports, especially the banking tickers and others with the history of dividend payment ahead of the NGX peak of the corporate earnings reporting season where most of the companies will announce their full year 2023 dividend payout. Also, all eyes are still on the fiscal and monetary authorities that are yet to give a clear direction of where the Nigerian economy is heading, as happenings at the global economic arena, especially geopolitical tensions. There is also the fear of a recession among others that will continue to influence investment decisions, while driving volatility.

The benchmark NGX All-Share index rebounded to close higher on an above average traded volume in the midst of positive market breadth and buying sentiment to signal position taking   in the midst of the ongoing portfolio repositioning for dividend income and capital gain. The market entered another accumulation or recovery phase in the face of an unstable outlook for the fixed income market and rising inflation which was 28.22% for November, even as the December data is scheduled for release on January 15 by the National Bureau of Statistics. Investors and traders are also betting on the outcome of this month’s Monetary Policy Committee meeting of the Central Bank of Nigeria (CBN) which will be the first in 2024 and to be preside over by Olayemi Cardoso the new Governor, as well as his Board of Governors.

The NGX index’s action remains above the T-line as it retraced up in the midst of a high volatility and positive momentum, trading above the short and long-term Moving Averages on the daily, weekly and monthly time frame. Portfolio rebalancing on the exchange continued as earnings and the dividend season draws closer with unaudited Q4 results hitting the market any moment from now. Also, more companies like BUA Foods and others notified the NGX and investors of their board meetings and closed period for the 2023 full-year financials, in the midst of January effects and other factors associated with the increasing economic headwinds

The candlestick formation at the end of the trading session revealed strength returning to the market and likely continuation of trend that needs confirmation as trading opens on Friday. Therefore, market players should target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings which price feeds on in any market cycle. Technically, the index’s action has slide into distribution phase and a topping chart pattern.

The strength behind the trend or the session recovery were revealed by momentum indicators, despite the overbought state of the market, as the ADX read 65.48, while RSI and Money Flow Index are looking down to 84.58 and 81.29 points against the previous session 83.72 and 83.37 points respectively. This should be a concern for discerning investors, as smart traders could cash out capital gain any time. The trading volume pattern suggests hold and watch disposition of market players and full return of many players who had gone on holidays and institutional investors accumulating more positions as others investment windows returns remain below inflation and negative.  Also, the anticipated financial market and economic reset in 2024, comes with huge opportunities to create wealth for smart investors and traders.

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Oil price rebounded today as its oscillation continue to trade at $77.64 per barrel in the midst of supply disruption and unexpected decrees in US crude supplies in the face of rising tensions as middle east conflicts escalating and red sea security concern, while the war in Ukraine and Russia has escalated to influence the global economic outlook. The geopolitical tension across the globe is a major threat to many economies. Also, oil supply increase by OPEC and others impact oil price as it continued trade below $80. This trend may likely continue in 2024, this up and down movement of oil price also continues to drive volatility.

Meanwhile, Thursday’s trading started on the upside and was sustained throughout the session, despite oscillating on buying interest in financial stocks and other, a situation that pushed the NGX’s index to an intraday high of 82,647.54 basis points from its lows of 81,640.42bps before closing above its opening level at 82,597.04 bps.

Trade metrics were positive and mixed, as volume of trade was lower compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 95% buy position and 5% sell volume. The total transaction volume index stood at 1.45points, just as impetus behind the day’s performance was strong as Money Flow Index looking up at 81.29pts, from the previous day’s 80.36pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Thursday’s trading, the composite NGXASI gained 572.66bps, closing at 82,024.38bps after opening at 82,024.38bps, representing a 0.70% up, just as market capitalization rose  by N313.4bn closing at N45.20tr from the previous day’s N44.89tr, which also represented a 0.70%  appreciation in value.

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Thursday’s upturn was driven by position taking and accumulation in the shares of Julius Berger, Cadbury, MTNN, Transcorp, Oando, BUA Cement, GTCO, Zenith Bank, UBA, FBNH, Accescorp, and Aiico, among others, which impacted positively on Year-To-Date gain of 10.46%. Market capitalization YTD gain stood at N4.54tr, representing 9.70% above its opening level for the year.

Bullish Sector Indices

All sectorial performance indexes for the session closed in green, led by the NGX Banking index after gaining 2.73%, followed by Insurance, Consumer, Energy and Industrial goods with 0.51%, 0.39%, 0.27% and 0.22% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 46:22, whereas activities in volume and value were down, after players exchanged 877.28m shares worth N14.41bn. Volume was driven by trades in Transcorp, SterlingNG,Accesscorp, Aiico and UBA

Royal Exchange and Guinea Insurance were the best performing stocks, gaining 10% each, closing at N0.99 and N0.44per share respectively on market forces and expectation of earnings.  On the flip side, Ikeja Hotel and Abbey Building lost 9.90% each, closing at N7.83 and N2.73per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiment and  profit taking to continue, as bargain hunters and ongoing portfolio persist ahead of unaudited Q4 2023 numbers and volatility in the face of  expected December CPI and coming MPC meeting. A pullback at this point will add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605