Mixed Sentiment As Investors Await MPC Outcome, Amid Volatility Of Q4 Earnings, General Election Blues

Market Update for January 23

The ranging market continued on the Nigerian Exchange as trading for the last full week in the month of January started on a positive note in the midst of buying pressure, as investors and traders bet on the outcome of the ongoing Monetary Policy Committee meeting of the Central Bank of Nigeria (CBN) which is expected to give a direction on rates, after the marginal slide in inflation at the end of December. We also note that mopping up of cash outside the bank vault is ongoing to make monetary policy achieved its purpose of stabilizing price and drive economic activities, and ahead of the January 31 deadline, when the old Naira notes cease to be legal tenders.

The benchmark NGX All-Share index closed marginally higher in the midst of a low traded volume and market breadth, halting the previous session’s loss on buying interests across sectors, even as investors and traders remain cautious, as they focus on the outcome of the MPC meeting Tuesday, and ahead of midweek’s NTB primary market auction. All these and expectations of more unedited 2022 Q4 and full year numbers are expected also to give market direction, or serve as a much needed trigger.

The relatively low transaction volume also indicates the possibility of markup by smart money after removing the supply, as inflation slipped marginally and fixed income market rates decline on the likely possibility that the MPC could leave the benchmark MPR unchanged, or worse-case-scenario, a 25-basis point raise, given that cost of debt servicing is already high. We note also that various company boards are scheduled to meet this week to approve their unaudited and audited financial statement for 2022.

The positive sentiment across some major sectors of the market despite the seemingly ranging position of the index action may continue to support the rally as revealed in the short- and medium-term trend which remain intact. This, therefore, signals the continuation of this recovery in the month of January due to earnings reporting season that would support price, notwithstanding uncertainties associated with the coming 2023 general elections, and possible post-election rally, all things being equal.

Technically, the NGX index action still in a distribution phase in the face of a topping chart and bullish V-shape pattern that supports reversal or continuation of trend on a daily and weekly time frame, as the divergence between the index action and MACD at the end of Monday trading on a dally chart supports reversal of trend, due profit taking in blue chip stocks. Let us keep our gaze on market forces and money flow.

Momentum indicators appear strong as revealed by the ADX reading 70.58, just as, RSI and Money Flow Index were mixed to read 76.73 and 61.77 points against the previous session 76.32 and 61.57 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 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, trading at $87.86 per barrel on China economic activities in the midst of increasing recession fear. Just as the geopolitical tension, high interest rate and inflation across the globe continue to threaten the world. 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 across markets.

Meanwhile, Monday’s trading started slightly in the downside before rebounding to oscillate for the rest the session on position taking and selloffs in some blue-chip stocks and others, a situation that pushed the NGX’s index to an intraday high of 52,657.69 basis points from its lows of 52,585.64bps before closing slightly above its opening level at 52,657.69bps.

Market technicals were positive and mixed, with lower volume of trade, 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 100% buy position and 0% sell volume. The total transaction volume index stood at 0.62 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 61.77pts, from the previous day’s 61.57pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Monday’s trading, the NGXASI inched up by 63.01 basis points, closing at 52,657.64bps, after opening at 52,594.68bps, representing a 0.12% up, just as market capitalization rose by N63.01bn closing at N28.68tr from the previous day’s N28.65tr, which also represented a 0.12% value gain.

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Monday’s upturn was driven by position taking in the shares of Geregu Power, Guinness, Berger Paints, Linkage, and Consolidated Hallmark Insurance Plc, among others, which impacted mildly on Year-To-Date gain to 2.74%. Market capitalization YTD gain stood at N823bn, representing 2.74% above its opening level for the year.

Bullish Sector Indices

Sectorial performance indexes for the session closed higher, except for NGX Industrial goods closed flat, while NGX Insurance led the advancers after gaining 0.22%, followed by Banking, Consumer Goods and Energy with 0.12%, 0.12% and 0.03% respectively.

Market breadth turned positive as gainers outnumbered losers in the ratio of 18:13. whereas activities in volume and value were mixed, after investors exchanged 143.74m shares worth N1.78bn. Volume was driven by trades in FBNH, Chams, GTCO, Transcorp and Sterling Bank.

John Holt and NSL Tech were the best performing stocks, after gaining 9.4% and 9.1% respectively, closing at N1.05 and N0.24 per share respectively on market forces.  On the flip side, Cornerstone Insurance and CWG lost 10% and 9.6% respectively, closing at N0.54 and N0.94per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiment and trend to continue ahead of the MPC meeting’s outcome on Tuesday, as well as volatility in the face of Q4 earnings expectations and election uncertainty, as pullback at this point 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.

Crucial Announcement

As the new year begins, you need to get started with activities that will help you in achieving your goals for the year. To this end, I must tell you that events and activities that happened in 2022 will shape 2023.

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CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605