Mixed Sentiment, As Investors Position Ahead Of January Inflation Data, Earnings Inflow 

Market Update for February    14
The seesaw movement on the Nigerian Exchange continued at the midweek, with the benchmark NGX All-Share index closing higher, following the price appreciation of highly capitalized stocks. This weighed on the market positively as it remained within the consolidation range and distribution phase that will usher in a markup or decline phase, depending on market forces and sentiment.
The NGX rebounded to wipe away the previous loss on a low traded volume and positive market breadth reflectinh the buying interest in Airtel Africa, BUA Foods, Geregu, Seplat and banking stocks that supported the uptrend in the face of shaking  big trend after the earlier formation of double top chart pattern. There was also the  changing outlook  in fixed income market, especially the money market instrument rates that triggered the flow of funds out of other alternative investment windows, while portfolio rebalancing continued.
Already, all eyes are on the January consumer price index report that will hit the market any moment from now, revealing the true position of yields in the fixed income market. It is no news that the prevailing hike in inflation and interest rates have eaten up the purchasing power of Nigerians. The fact that it has also cut off savings reflect a gloomy economy. That notwithstanding, the Central Bank of Nigeria (CBN) is likely to hike its benchmark Monetary Policy Rate at the committee’s in a fortnight, under the guise of checkmating the rising inflation even as analysts have argued that it is more of a structural problem especially with the worsening level of insecurity that has kept farmers away from their farmlands.
As noted previously, investors and traders continue to reassess opportunities in money market instruments as early filers start releasing their full-year numbers any moment from now, along with dividend declarations to guide investors decision on yields and timing. The NGX index’s action retrace up to trade above the T-line, which signals uptrend but needs confirmation, as the current phase of the market remain somewhat  above the 20-Day Moving Average. The correction and mix trend in February will continue before another rebound on the strength of audited earnings reports and dividend season in the midst of FGN Savings bond, macroeconomic data and volatility.
The NGX witnessed buying sentiments in the midst of continued sector rotation and portfolio repositioning, as ongoing oscillation create buy opportunities for dividend players ahead of company audited accounts. Investors should watch out for the value areas of resistances and supports levels as more earnings hit the market any moment from now. The index’s action has displayed a mixed picture as market players eagerly await numbers from the companies, following the optimism fueled by the belief that the impressive performance from the financial sector among others may impact the market positively. This is despite concerns about the changing fundamentals and growth prospect of the economy in the face of rising macroeconomic headwinds that will support a revaluation of assets.
The equity market is a leading indicator of the economy any time and any day, as such all eyes are still on the fiscal and monetary authorities for a clear direction of where the economy is heading, given developments in the global economy, especially the sustained geopolitical tensions in the Middle East and Eastern Europe. There is also the fear of a recession, among other issues that will continue to influence investment decisions, while driving volatility. The NGX index’s action remains flat on the T-line on daily basis in the midst of high volatility and mixed momentum to trade above the short and long term Moving Averages on the daily, weekly and monthly time frame. Portfolio rebalancing on the exchange continued in the face of earnings season and volatility.
The bullish candlestick formation at the end of the trading session revealed a reversal or continuation of uptrend, depending on market forces.  Therefore, market players should target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings which price feeds on in any market cycle. Technically, the index’s action is still at overbought state with bearish money flow divergent which a topping chart pattern that signal correction.
The momentum indicators signal efforts to reverse on a mixed direction, as ADX continue to looking down and reads 69.50, while RSI and Money Flow Index are mixed at 73.84 and 59.55 points against the previous session 70.80 and 59.92 points respectively. This should be a concern for investors and smart traders as they trade with caution because funds are still leaving the market. The trading volume pattern suggests hold and watch disposition of market players, as traders reduce position in some sectors in the face of others investment windows returns remain below inflation and negative.  Also, the anticipated financial market and economic reset in 2024, comes with challenges and huge opportunities to create wealth for smart investors and traders.
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Oil price extended it losses at midweek to continue its oscillation, as it trades at $81.30 per barrel in the midst of surge in US inventories and escalating Middle East conflict. Coupled with the Ukraine and Russia war that had persisted in the face of inflation resurfacing again.  The rising geopolitical tension across the globe is also a major threat to many economies and the commodity market. Also, oil supply increase by OPEC and others impact oil price as it continued to oscillate. This trend may likely continue in 2024, this up and down movement of oil price also continues to drive volatility.
Midweek’s trading opened in the upside and was sustained despite oscillating throughout the session on buying interests in banking stocks, blue chip companies among others, a situation that pushed the NGX’s index to an intraday high of 104,206.70 basis points, from its lows of 101,708.50bps, before closing above its opening figure at 103,498.30bps.
Trade metrics for the session were positive and strong, as volume was higher 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 70% buy position and 30% sell volume. The total transaction volume index stood at 0.56 points, just as impetus behind the day’s performance was relatively strong as Money Flow Index is  looking  down at 59.55pts, from the previous day’s  59.92pts, indicating that funds left the market, despite closing in the green.
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Index and Market Caps
The NGXASI, at the close of trading gained 1,790.58 basis points, closing at 103,498.28 after opening at 101,707.70bps, representing a 1.76% growth, just as market capitalization rose by  N979.78bn, closing at N58.63tr from the previous day’s N55.65tr, which also represented a 1.76% value gain.
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The upturn was driven by buying interests in the shares of FBNH, UBA, Zenith Bank, PZ, BUA Foods, Airtel, Geregu, Seplat and CWG, among others, which impacted positively on Year-To-Date gain which inched up to 38.42%. Market capitalization YTD gain stood at N15.65tr, representing 38.43% above its opening level for the year.
Mixed Sector Indices
The sectoral performance indexes for the session were mixed, as NGX Industrial Goods  and Insurance  index  closed lower by  3.54% and 0.25% respectively, while, NGX Oil/Gas  led the advancers after gaining 5.34% followed by Consumer Goods and Banking  with  3.99% and 2.01% respectively.
Market breadth turned positive with gainers outnumbering  losers in the ratio of 27:24, while transactions in volume and value were up after investors exchanged 426.86m shares worth N12.11bn. Volume was driven by trades in, FBNH, UBA, Accesscorp, Transcorp and NB.
Unity Bank and Airtel Africa were the best performing stocks, gaining 10% each, closing at N2.42 and N2200.00 per share respectively on market forces and proposed share buyback. On the flip side, NCR and Thomas Watt lost 10% each, closing at N4.32 and N2.25 per share, purely on selloffs and profit booking.
Market Outlook
We expect mixed sentiment to continue as all eyes are on the January Consumer Price Index reports today, profit taking and portfolio repositioning ahead of the fixed income market activities next week and audited corporate earnings with dividend expectations.  This is amidst the volatility and upcoming policy meeting, while pullback at this point will 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.
Ambrose Omordion
CRO|Investdata Consulting Ltd