Investors Position Ahead Of Audited Reports, As MPC Outcome Sets Tone For Economy In 2022

Market Update for January 20

Thursday’s trading activities on the Nigerian Exchange extended its positive sentiment on bargain hunting, driven by position taking in dividend paying stocks and interests generated by the share buy-back scheme of Dangote Cement.

The company’s share price hit a 13-year high at N284, on a strong buying sentiment and high traded volume to support the session’s performance, creating wealth for its shareholders. The scheme also supported the company’s fair value in line with global market practice, especially for large corporates. This programme has obviously boosted liquidity in the market, broadening investors’ appetite and sentiment in the whole market.

Consequently, the NGX All-Share Index has rallied 7.43% this year from its December 31, 2021 level, validating our position on the ‘ Effect rally’.

The market has broken out its five-year and 2018 strong resistance level to its 12-year high, on improved volume traded and positive sentiment, extending the new trend and characteristics that support an uptrend. The index action now looks to the 2008 all-time market high.

As economic fundamental news, expected corporate earnings, outcome of the CBN Monetary Policy Committee meeting holding next week, and the rallying oil prices in the international market. There are, however, other factors, including the 2021 full-year earnings reporting season expected to shape the market in Q1.

The positive performance recorded on Thursday was attributed to buying interests in industrial goods and financial sector stocks, ahead of the earnings reporting season. The high volume of transactions and price actions reveal the presence of buyers and return of institutional players to the market after the holidays, as positive fundamentals and technical patterns reveal the undervalued state of the market and buying opportunities.

Technically, the NGX index’s action had sustained its uptrend on a high traded volume to continue its recovery, as discerning investors reposition their portfolios ahead of the earnings releases. Also, the first unaudited Q4 and full-year earnings reports from Infinity Trust Mortgage hit the market.

Trade metrics and candlestick at the end of the session revealed positive sentiments that supports an uptrend, as the NGX index traded above its 20 and 50-Day Moving Average. Momentum indicators for the day were strongly positive, just as the ADX read 40.05, RSI closed above 50 at 81.14 and Money Flow Index read 86.25 points on the daily chart.

The continuation of this trend depends largely on the interplay of market forces and flow of funds into the equity space, as the fixed income market yields direction remains unclear, with inflation on another uptrend at 15.63%.

Meanwhile, Thursday’s trading started slightly in the downside before rebounding powerfully on demand for Dangote Cement, Zenith Bank and NGX Group that pushed the NGX index to an intraday high of 45,890.52 basis points, from its lows of 44,395.57bps.

Thereafter, the index closed above its opening figure at 45,890.52bps.
Market technicals were positive and strong as volume traded was higher than the previous day’s in the midst of breadth that favours the bulls on a buying pressure as revealed by Investdata’s Sentiment Report showing 100% buy volume. The total transaction volume index stood at 1.05 points, just as the momentum behind the day’s performance remained strong. Money Flow Index was up at 86.25points, from the previous day’s 79.48points.  

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Index and Mkt Cap Movement 
At the end of Thursday’s trading, the benchmark index gained 460.38 basis points, at 45,890.52bps, after opening at 45,430.16bps, representing a 1.01% growth. Market capitalization rose by a further N248.04bn, closing at N24.68tr, from the opening value of N24.48tr, also representing 1.01% value gain.

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This day’s upturn was driven by position taking in Dangote Cement, Zenith Bank, Vitafoam, Access Bank, NNFM, United Capital and GSK, among others.

This impacted positively on Year-To-Date gain which rose to 7.41%. Market capitalization growth stood at N2.40tr YTD, representing an 8.98% improvement from the opening level for the year.
Mixed Sector Indices 
Performance indexes across sectors were mixed, as the NGX Consumer Goods and Energy closed 0.17%l and 0.09% lower respectively, while the NGX Industrial goods led the advancers, gaining 2.72%, followed by Insurance and Banking with 0.52% and 0.36% respectively.

Market breadth turned sharply positive as gainers outpaced losers in the ratio of 27:9, while transactions in volume and value terms were significantly up after market players exchanged 873.49m shares worth N31.54bn, compared to previous day’s 252.94m units valued at N8.93bn. Volume was boosted by trades in Dangote Cement, FBNH, Transcorp, Sovereign Trust Insurance and Fidelity Bank.

NNFM and Learn Africa were the best performing stocks for the day after gaining 9.92% and 9.32% respectively, closing at N7.28 and N1.29 per share respectively, on market sentiments and earnings expectations. On the flip side, Dangote Sugar and Stanbic IBTC lost 2.74% and 2.70% respectively, closing at N17.75 and N36 per share, purely on profit taking.

Market Outlook
We expect a mixed sentiment to continue on positioning in fundamentally sound stocks and profit taking, as rallying oil price support economic and market fundamentals. Also, investors are targeting dividend paying stocks as they reposition portfolio ahead of 2021 Q4 and full-year audited earnings reports that may start hitting the market any moment from now.

With all eyes on MPC meeting outcome, as inflation reversed up to 15.62% and other economic data. Also noteworthy is the oil price that remains above $74 projection of IMF at $88.22, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.

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 up to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and the new January Effect pattern likely to influence stock prices ahead of 2021 earnings reporting season.
The relatively low volume traded in the midst of uptrend and recovery moves are 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
Tel: 08028164085, 08179547605

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