Mixed Sentiment, Caution Still, Ahead Of MPC Meeting, Volatility Amid Q4 Earnings, Election Worries

Market Update for January 19

Despite the seeming cautious trading on the Nigerian Exchange on Thursday ahead of the first policy meeting of the Central Bank of Nigeria (CBN), the benchmark NGX All-Share index finished marginally higher in the midst of positive sentiments and market breadth, halting the previous session’s loss on a low traded volume.

Since the latest NGX breakout or fake-out, the market’s up and down movement in the face of strong momentum is a reflection of profit taking and caution trading as the recovery remains strong on the back of dividend hunting ahead of 2022 financials and corporate actions. With the changing investor and traders’ sentiment across the globe due to the rising fear of recession, all eyes are on the outcome of next week’s meeting of the CBN’s Monetary Policy Committee slated for Monday and Tuesday as macroeconomic indices and developments point to the possibility of a slowdown in rates by central banks across the globe to avert economic contraction.

The trend was driven by marginal gains in financial services and industrial goods stocks to sustain the uptrend in the face of a topping chart patterns arising from the recovery move of the market, which signal possibility of reversal or continuation of trend as revealed by the index action. The relatively low volume transaction, 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 possibility that the MPC could leave the benchmark MPR unchanged, or worst case scenario, a 25 basis point raise is high, as cost of debt servicing is high. We note also that the various company boards are announcing their scheduled meetings to approve audited financial statement for 2022.

The positive sentiment across some major sectors of the market despite the seeming flattish position of the index action, this may continue to support the rally as revealed in the short and medium term trend which remain intact, therefore signaling the continuation of this recovery in the month of January due to earnings reporting season that would support price. This is however, 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 Thursday trading on a dally chart supports reversal of trend, due selloffs that hit consumer goods stocks. Let us keep our gaze on market forces and money flow.

Strength indicators appear to remain strong, as revealed by the ADX reading 69.50, just as, RSI and Money Flow Index were mixed to read 76.96 and 78.20 points against the previous session 76.90 and 82.50 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 $86.45 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, Thursday’s trading started slightly in the upside before oscillating throughout 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 52,631.80 basis points from its lows of 52,603.89bps before closing slightly above its opening level at 52,626.42bps.

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 81% buy position and 19% sell volume. The total transaction volume index stood at 0.57 points, just as momentum behind the day’s performance was strong as Money Flow Index looked down at 78.20pts, from the previous day’s 82.50pts, indicating that funds left the market, despite the flat market.

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Index and Market Caps

At the end of Thursday’s trading, the NGXASI inched up by 10.91 basis points, closing at 52,626.42bps after opening at 52,615.51bps, representing a 0.02% up, just as market capitalization rose by N5.94bn closing at N28.66tr from the previous day’s N28.66tr, which also represented a 0.02% value gain.

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Thursday’s upturn was driven by position taking in the shares of Lafarge Africa, PZ, Dangote Sugar, Fidson, ETI, NGXGroup, University Press and Nahco, among others, which impacted mildly on Year-To-Date gain to 2.68%. Market capitalization YTD gain stood at N783bn, representing 2.68% above its opening level for the year.

Mixed Sector Indices

Sectorial performance indexes for the session closed mixed, as NGX Consumer goods closed lower by 0.03%, while NGX Insurance led the advancers after gaining 0.36%, followed by Banking and industrial goods with 0.20% and 0.05% respectively.  Just as Energy was flat

Market breadth turned positive as gainers outnumbered losers in the ratio of 26:16; whereas transactions in volume and value were down, after investors exchanged 129.04m shares worth N1.82bn. Volume was driven by trades in Zenith Bank, GTCO, UBA, Royal Exchange Assurance and Accesscorp.

International Energy Insurance and Computer Warehouse Group were the best performing stocks, after gaining 9.76% and 9.47% respectively, closing at N0.45 and N1.04 per share respectively on lifting technical suspension ahead of Mandatory Takeover date and market forces.  On the flip side, C & I Leasing and Chams lost 10% and 7.14% respectively, closing at N3.15 and N0.26per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiment and trend to continue ahead of MPC meeting and volatility in the face of Q4 earnings expectation 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




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