February Outlook: Expect Volatility, Mixed Sessions, On Corrections, Ahead Of Year-End

Market Roundup for January
Nigeria’s benchmark All-Share index rose on Monday 0.9% Monday, to close a bullish and volatile January higher. The level of growth made the month the best over the last three years on positive sentiment, as market capitalization crossed the N25tr mark.

Investdata notes that January markup phase is a bullish sign that indicates the presence of institutional players, given the increased number of deals and volume, the highest since November 2021.
The market had a strong bull-run despite the selloffs and profit booking in Dangote cement and others.

But investors buying interests in bluechip companies and dividend paying stocks that had rallied, supported the uptrend in the face of impressive unaudited earnings that hit the market. We cannot overlook the effects of recent events, especially the decision by the Central Bank of Nigeria’s Monetary Policy Committee to leave rates unchanged, added to the decline in NTB primary market auction rates in the short and long tenor. 

This should make the equity space more attractive for fund managers in the new month, especially as the presence of foreign investors in our market has declined in the past two years in the aftermath of thr COVID-19 outbreak. The impact of this may not affect the market significantly today,

l with the normalization monetary policies in mature economies, helped also by the rallying oil prices, positive corporate earnings at home, and favourable economic data.  The bull-run during the month was influenced by the appreciation in prices of high caps, listing of BUA Foods shares, and the second tranche of the Dangote Cement share buyback programme.

They helped January patterns repeat itself after the loss suffered in December, due to the absence of the usual Santa Claus rally.

At the end of January, the Nigerian equity market reversed December’s negative outing, rallying to support the recovery since June 2021. This was despite the uptick in inflation rate to 15.63% in the month of December, according to data from the National Bureau of Statistics (NBS).

Trading metrics and patterns on the Nigerian Exchange (NGX) in January, the first month of the year, signaled a trend continuation with gaps being filled ahead of the release of more audited earnings reports, especially by early filers in February and an eventual portfolio reshuffling along sectors and companies’ performance.

The positive responses to the better-than-expected numbers as of release dates and positioning in mispriced stocks by investors pushed, many equities to new 52-week highs. This confirmed the inflow of funds into equities, and confidence in the market.

As noted earlier, the unaudited scorecards of various listed companies have given insight as to the real state of the economy and the companies in Q4. We can only also correctly hazard a guess as to what the Q4 GDP will look like when it is eventually published by the National Bureau of Statistics.

The possibility of prices rallying further from here in this new month is high, amidst portfolio reshuffling on the strength of the Q4 and unaudited 2021 full year numbers. Investors can, there rest assured of juicy rewards in form of dividends when the audited full-year score-cards begin to flow into the market, with the possibility of improved payout.

In the 20 trading sessions of January, the NGX All-Share index recorded gains in 14 sessions and was down in six, resulting in 9.15% year-to-date gain, even as we note the overbought state of the key performance index and some companies, their fundamentals, and the possibility of the seemingly high dividend yields attracting more inflows to the market. Worthy of note also isvthe fact that some equities are selling at their new 52-week highs.

Meanwhile, the benchmark Index, during the month, gained a total of 3,908.23 basis points, closing at 46,624.67bps, after touching a high of 46,905.63bps from its low of 42,479.57bps for the month.

The index opened at 42,716.44bps, on strong buying interests that impacted positively on the index and stock prices, pushing them further up to breakout various resistance levels and the 46,000 psychological lines to record its 14-year high last tested on September 25, 2008.
Total ‘buy’ volume for the month was 94% and 6% sell position, further extending the bull transition from last year, while volume index for the period was 1.04. Market capitalization rose by N2.83tr, closing at N25.12tr, from N22.30tr, representing a 9.15% appreciation in value, helped by capital appreciation and the listing of BUA Foods.

Traded volume for the period was up slightly by 1.5%, at 6.85bn shares, as against 6.75bn units recorded in the preceding month, just as market breadth for the month was positive with advancers outnumbering decliners in the ratio of 63:30 to reverse the December bear position that resulted from factors mentioned above.

Mixed Sectorial Performance
The sectorial performance indexes were mixed and other NGX indices were bullish, except for the NGX Insurance and Consumer goods indexes that closed in the red by 5.95% and 2.48% respectively. As shown by the chart below, the NGX Oil/Gas, Banking and Industrial Goods indexes boosted the market the most during the month, outperforming the general market. The NGX Mainboard and Energy indexes gained a total of 15.39% and 14.14% respectively, driven by price appreciation of telecoms and oil companies by big names in the sectors and rebound in banking stocks. The NGX’s Dividend Yield index that was supported by price appreciations in dividend paying stocks with high yieldd that recorded 3.07%; the NGX industrial index garnered 3.39%, to support the market performance during the period.
Others represented in the chart below reveal investors’ positive sentiment and the clear decision among traders, as the market’s Price-To-Earnings Ratio is below 12times.

Best And Worst Performing Stocks For January
The best-performing stocks for the month under review were predominantly mixture of low, medium and high caps across the sectors, led by Academy Press, which gained 88%, as a result of its low price attraction and market sentiments. It was followed by Courteville Business Solution and ETI with 50% and 43.68% respectively. Airtel Africa climbed 33.09% up, on positive sentiment also, and the impact of its dual listing, while NFP Microfinance chalked 28.24%; among others.

Best Performing Stocks in January

% Change

Academy Press

Courteville Bus, Solution


Airtel Africa

NPF Microfinance

Guinness Nigeria
Consumer Goods

Fidson Healthcare

Wema Bank

Seplat Energy

Jaiz Bank

Source: Investdata Research
The worst performing stock was Sunu Assurance which lost 33.33%, amidst selloffs and market forces; followed by Sovereign Trust Insurance’s 23.33% slide, due to weakened fundamentals and profit taking from its recent rally. Mutual Benefits Assurance’s share price fell by a further 21.21%, showing an apparent lack of investor confidence in the company, despite the seemingly improved numbers and traded volume in the stock. Regency Insurance lost 19.61% of the year’s opening value, due to profit taking and selloffs in the sector as investors’ seek to reposition in dividend paying stocks with prospect of future growth in earnings that will drive share price and payout.

Worst Performing Stocks in January

% Change

Sunu Assurance



Regency Insurance

University Press

NEM Insurance


Prestige Assurance

Coronation Insure

FTN Cocoa
Agriculture Bus

Source: Investdata Research

Technical View

The NGX’s Index action for the month of January revealed an uptrend and breakout of a saucer chart pattern that supports trend continuation, as the index is set to breakout another strong resistance level of 46,906.63bps and 47,000 ahead of the audited financial reports. At the same time, it is trading above its 50-Day Moving Average on the monthly chart, with positive sentiments and improved traded volume.
The market is still trading within the V-shape recovery pattern, despite the likely mixed trend on profit taking and price correction, any moment from now, depending on market forces. The benchmark index has slightly entered its overbought region on a daily, weekly and monthly time frame, reflecting an increased inflow of funds that pushed stock prices up in the first month of 2022, extending the historical positive sentiment in January effect trend, while maintaining the pattern of uptrend during the month in recent years.

The trading patterns and momentum, going forward, are likely to improve or change, as investors react to the expected audited full-year earnings news, portfolio rebalancing and repositioning, with early filers kicking off the season in February with dividend news announced earlier by MTNN with its corporate action of N8.57 each. Market technicals for the month were positive, a situation expected to remain unchanged in the new month.

Market Outlook
Volatility is expected to continue in the new month, even as the outlook remains mixed due to likely price corrections, or pullbacks for a few days, due to profit taking and portfolio reshuffling ahead of year-end and 2022 corporate actions. The anticipated correction in the new month will, however, strengthen recovery. Despite the rise in inflation, insecurity and the omicron wave of the coronavirus, as this wave will further boost the healthcare sector due to government and CBN’s commitment to enhancing public health.
But investors at this point should not be greedy, but let their decisions be guided by their investment goals and exit strategies, even as the healthy inflow of funds into the equity assets due to prevailing low rates in money market is likely to continued till next MPC meeting.

Again, the current breakouts of resistance levels offer traders opportunities to position for the short term, while investors should target fundamentally sound, and dividend-paying stocks for possible dividend income and capital growth.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605

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