Expect Uptrend On Buying Interest In BUA Foods, Rising Oil Prices

Market Update for January 5

Trading activities on the Nigerian Exchange continued its positive outing for the second consecutive session in the new year, as the benchmark All-Share index closed higher on buying interests in high cap equities and the newly listed BUA Foods, thereby sustaining the positive sentiment on a very high traded volume recorded in recent times in the market. This time, there was a positive market breadth. 

The recent moves in the market and investors vibes signal the high possibility of this month defying the usual January effect and maintaining the positive performance recorded over the last two years. The month has historically posted gains in seven of the last twelve years, including pre-election years, recording losses in the other five within the period. This rally in the first month of the new year resulted from many factors ranging from market sentiments and performance in the previous year, market expectations in Q1, as well as investors’ and traders’ positioning for dividend paying stocks ahead of the Q4 unaudited accounts and 2021 full-year financials that comes with surprises in form of rewards for shareholders. The chart below reveals NGX January performance till date:

Trading metrics for the session show investors’ buying interest in BUA Foods as trades on the stock commenced at the midweek after listing it’s entire 18b ordinary shares at N40 each in the previous session, with more than one billion units of the stock exchanging hands for the day. Gains by Airtel Africa, Seplat Energy, Access Bank and others pushed the market up to sustain the previous day’s bull-run, despite the fact that most institutional investors and fund managers are still in the holiday mood. Also, on Wednesday, traders took profit in Zenith Bank, GTCO and FBNH, regardless of the seeming high volume traded in those equities.

At midweek’s trading, energy and telecomm stocks witnessed a positive buying sentiment by local and foreign players, especially in Airtel, Seplat, Oando, NB and GTCO, while bids in MTNN, Dangote Cement and other high cap stocks were relatively weak.

Technically, the NGX index’s action broke out its recent resistance of 43,162.17 on a huge volume to strengthen its recovery and bull transition as revealed by the candlestick at the end of the day’s trading, with investor sentiments rising higher, while the index closed the session above the 20 and 50-Day Moving Average. Momentum indicators for the day were positive, just as the ADX is reading 21.96, RSI above 50 at 65.85 and Money Flow Index looking up at 60.00 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds into the equity space as fixed income market yields direction remains unclear and flat. 

Meanwhile, Wednesday’s trading started slightly in the green before pulling back at the midday, and rebounded for the rest of the day on buying interests in BUA Foods and Airtel, which pushed the NGX index to an intraday high of 43,476.75 basis points, from its lows of 42,479.57bps. Thereafter, the index closed above its opening point at 43,476.75bps.

Market technicals were positive and strong as volume traded was higher than the previous day’s in the midst of breadth favouring the bulls on a buying pressure as revealed by Investdata’s Sentiment Report showing 100% buy volume. The total transaction volume index stood at 3.58 points, just as the impetus behind the day’s performance remained relatively strong. Money Flow Index was up at 62.00 points, from the previous day’s 50.72points.  

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Index and Mkt Cap Movement 

At the end of the day’s trading, the composite NGXASI, gained 450.51 basis points, at 43,476.75bps after opening at 43,026.23bps, representing a 1.05% growth, just as market capitalization rose  by N242.75bn, closing at N23.43tr, from the opening value of N23.18tr, also representing 1.05% appreciation  in value.

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Midweek’s upturn was driven by buy interests in BUA Foods, Airtel, Seplat, Oando, Lafarge Africa, Access Bank, Fidson, Ardova, Eterna, Honeywell, May and Baker, among others, which impacted positively on Year-To-Date gain, raising it to 1.78%. Market capitalization growth stood at N1.51tr YTD, representing a 4.08% from the opening of the year.

Bearish Sector Indices 

Performance indexes across the sectors were mixed, as NGX Oil/Gas and Insurance index closed 3.12% and 0.85 higher, while the NGX Industrial Goods led the decliners, after losing 2.42%, followed by Banking and Consumer Goods with 0.50% and 0.02% respectively.

Market breadth turned positive as advancers outnumbered decliners in the ratio of 22:17, while transactions in volume and value terms were significantly up as stockbrokers traded 1.24bn shares worth N42.97bn, compared to the previous day’s 216.85m units valued at N1.52. Volume was driven by trades in BUA Foods, Wema Bank, Transcorp, NGXGroup and UBA.  

Airtel Africa and BUA Foods were the best-performing stocks after gaining 10% each, closing at N1,050.50and N44 per share respectively as investors reacted to the news of property sale to boost network expansion, and sentiments for the newly listed stock. On the flip side, Unity Bank and Royal Exchange Assurance lost 9.62% and 9.41%, closing at N0.47 and N0.77 per share, purely on selloffs and profit taking.

Market Outlook

We expect uptrend to continue on speculative buying in BUA Foods and impact of oil price hitting $80 again in the face of omicron and reopening of some economy. Just as repositioning in dividend paying stocks ahead of 2021 Q4 and full year unaudited earnings reports that may start coming in any moment from next week. Already, two companies made their corporate actions available to the market, announcing a growth in their dividend payout to reflect the numbers posted.  Also, inflow into equity space is looking up slowly on changing investment decision to keep this trend ahead of new year holiday.  As market players digest economic data and happenings in fixed income market after the NGX index action retraced to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and seasonality likely to influence stock prices ahead of year-end window dressing.

The relatively low volume traded in the midst of retracement is creating new buy opportunities on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the session revealed that institutional players are not buying yet.  It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position.  Even as many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield capable of serving as a hedge against inflation

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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