Market Update for January 11
Market volatility continued on the Nigerian Exchange at the midweek as the composite NGX All-Share index rebounded to close higher in the midst of increasing buy power and strong momentum, despite the seeming profit taking activities in some medium and low stocks at the end of day trading. The retracement was driven by position taking in dividend paying companies as fourth quarter earnings reports kick off next week in the face of positive sentiment and market breadth. These are expected to come alongside the December consumer price index to give direction and influence the flow of liquidity.
Price structures at the end of trading on Wednesday signals a trend reversal or continuation, depending on market forces as trading opens, just as more companies continue to notify the exchange of its closed period and board meetings. Investors also continue to bet on the expected outcome of the first meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) for the year. There is also 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.
Position taking across some major sectors of the market continue to support the recovery as revealed in the short, medium and long term trend, therefore, signaling the continuation of this recovery for the rest of the month due to the expected full-year earnings and corporate actions that would support price, notwithstanding profit taking. There is also 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 renewed buying pressure supported the NGX All-Share index at the midweek, trading above the 200-Day Moving Average on the daily and weekly time frame in the midst of volatile but positive sentiments. This was driven by the 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 more liquidity, buying interest, earnings surprises and disappointments. Also, rates and yields in the fixed income market have been a plus, as the first TB primary market auction recorded decline across all tenors to 2%, 4.33% and 7.30% respectively for 91day, 182day and 364day in inflationary environment, where the last rate was 21.47%.
Technically, the NGX index’s action is still in its distribution 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.
Momentum indicators appear to remain stronger, as revealed ADX reading 64.89, just as, RSI and Money Flow Index are looking up to read 75.51 and 83.03 points against the previous session 73.83 and 82.10 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 rebounded powerfully to trade at $82.81 per barrel on China demand for oil counters huge inventory and fear of demand due impending global recession 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.
Midweek’s trading started on the upside and oscillated for the rest of the session due to profit taking and buying interest in some highly priced stocks and blue chip companies, a situation that pushed the NGX’s index to an intraday high of 51,746.32 basis points from its lows of 51,369.76 bps before closing above its opening level at 51,729.87bps.
Market technicals were positive and mixed, with lower volume of trade compared to the previous session in the midst of positive breadth and buying sentiment as revealed by Investdata’s Sentiments Report showing 96% buy position and 4% sell volume. The total transaction volume index stood at 1.29 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 83.03pts, from the previous day’s 82.10pts, indicating that funds entered the market.
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Index and Market Caps
The key performance index NGXASI, at the end of the day trading gained by 283.27 basis points, closing at 51,729.87bps after opening at 51,446.60bps, representing a 0.55%, just as market capitalization rose by N154.29bn closing at N28.19tr from the previous day’s N28.02tr, which also represented a 0.55% appreciation in value.
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Meanwhile, midweek’s upturn was driven by demand for the shares of BUA Cement, GTCO, PZ, ETI, Accesscorp, Wema Bank and UPDC, among others, which impacted positively on Year-To-Date gain of 0.93%. Market capitalization YTD gain stood at N251.4bn, representing 0.93% above its opening level for the year.
Bullish Sector Indices
Sectorial performance indexes for the session closed in the green, except for the NGX Insurance that closed in red with 0.67% while NGX Industrial goods led the advancers after gaining 1.50%, followed by Banking and Consumer goods with 1.05% and 0.15% respectively. Just as NGX Energy closed flat.
Market breadth was positive as gainers outnumbered losers in the ratio of 26:11; whereas activities in volume and value were down, after stockbrokers traded 281.94m shares worth N8.16bn. Volume was driven by trades in FBNH, BUA Cement, GTCO, Accesscorp and Transcorp.
Thomaswy and Champion Breweries were the best performing stocks, after gaining 9.48% and 9.45% respectively, closing at N1.27 and N4.75 per share respectively on market forces and earnings expectation. On the flip side, Royal Exchange Assurance and Wapic Insurance lost 7.41% and 6.67% respectively, closing at N1.00 and N0.42per share, purely on profit taking.
We expect positive sentiment and nixed 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 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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