Mixed Sentiment May Linger Ahead Of December Inflation, Q4 GDP Data, Q4 Financials

Market Update for the Week Ended January 6 and Outlook for Jan 9-13

It was a good start for year 2023 on the Nigerian Exchange, despite the seeming negative close of the first trading week of the year, as profit taking hit some highly priced stocks and blue chip companies after the market had rallied for seven consecutive weeks on a strong buying sentiment and momentum across the major sectors of the market. Also, the market recovery and volatility extended into the month of January in the midst of following the historical trend pattern for the period and January effects, as all eyes are on macroeconomic data, Q4 unaudited earnings reports, 2023 corporate action and changing yield environment in the fixed income market.

The benchmark NGX All-Share Index over the period closed marginally lower, to trade above the T line, 200-Day Moving Average and heading to the 52,000 psychological line, on continued closed period and board meeting notification and position taking after new year day holiday. This uptrend and recovery of NGX index are to likely continue, despite the pullback recorded last week and increasing electioneering activities, as transaction volume remain above its traded volume on a stronger positive market breadth and buying power.

At the current phase of the market, it is very important for players to understand the impact of market and economic cycle in their investment decisions, knowing that traders and investors are looking to pull money out of the market regularly by way of profit taking, while others are taking advantage of price correction to buy into position.

As such, the only thing you are really looking for is a situation where the price of stocks you bought move in your favour. As such, common sense dictates that “Only Price Pays,” not news, not how much we love a stock or the company. If the price does not move, you do not make any money, period. If price movement is what pays us, then it is only logical that we focus mainly on the price.

Most indicators are based on price, so they lag the last traded price for an investment. So, we focus on price action or structure, momentum and timing for profitable trading at any market cycle.

Already, December Purchasing Managers’ Index had given an insight into what impact it will have on corporate performance for that period, after sustaining  the positive expansion recorded in the last quarter of 2022, with 0.30 points growth to 54.60 points from 54.30 points in November, as market expects consumer price index for December in the face of  declining yields in fixed income market, especially as reflected in  treasure bill primary market auction rates and recent FGN saving bond rates/ yields. The expected policy shift that will give birth to the financial market, economic and political reset are underway in the face of policy summersaults of the government’s economic managers and the government itself refusing changes.

The buying patterns in the new month and the week under review, indicates that funds are flowing into the market, notwithstanding the profit taking witnessed and relatively low traded volume that is yet to really confirm the full presence of institutional investors. We note the increasing volume in some individual stocks in the market, given that the NGX index has technically sustained its recovery, as revealed by short, medium and long term trends, coupled with momentum indicators. Also, NGX index is trading above the 200-Day SMA on a bullish channel, trading above the T-Line and 50-Day EMA on the weekly chart. At this point, the possibility of institutional investors’ entry the market ahead of earnings reporting season and corporate actions in 2023 is high.

Also, profit-taking is expected at this stage after the market had rallied for seventh successive weeks, resulting in a 0.06% month-to-date loss, as investors’ continue realignment of their portfolios on the strength of corporate earnings and trend. Also, players are viewing all of these against the backdrop of the rampaging inflation as they hedge against the rising inflation in some stocks with high dividend yields and strong earnings to support higher payout as financials of companies with December year end are around the corner.

To navigate Q1 2023 and the rest of the year profitably using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent range market. Despite the low volume of transaction witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

As oil price continues its oscillation, to trade at $80.06 per barrel, on border reopening in China in the midst of increasing fear of recession as another rate hike by FED and ECB, Russia oil caped and China confusing rising cases of Covid 19 with its restriction and reopening, geopolitical tension and inflation across the globe. Also supply tighten due to the Russia-Ukraine war that has been lingering.  The up and down movement of oil price also continues to drive volatility across the globe.

Movement Of NGXASI

In the four trading days of the week after Monday’s public Holiday, NGX index needed a positive sentiment and buying interests in the three trading sessions and one day down market due to profit taking activities, as selloffs in BUA Cement and Airtel weighed on the market, after breaking out resistance levels of 51,000 pints to test 51,584.10 on above average traded volume for the period.

Trading started the period on a positive note, extending the previous session’s gain by 0.74%, which was sustained at midweek before pulling back on Thursday by 1.53% and rebounded on Friday with 0.72% as players took position in Airtel and others. This brought the week’s total loss to 0.06%, compared to the previous week’s 3.11% gain.

Consequently, the composite NGX All-Share Index slide by 28.72 basis points, closing at 51,222.34bps, compared to the week’s 51,251.06 points opening level, after touching intra week low of 50,830.51 from its highs of 51,785.05points. Similarly, market capitalisation fell by N16bn, representing a 0.06% value loss, as it closed at N27.90tr, from the previous week’s N27.92tr,

The top advancers’ table for week was dominated by low, medium and high cap stocks, amid buying sentiment in blue chip companies, despite the relatively low volume and volatility, as portfolio repositioning continued. Also notable is the fact that investors are taking advantage of low price to buy into value and high dividend yield companies as recovery persist.

Market advances and distribution line indicate a positive breadth as gainers outnumbered losers in the ratio of 38:17 on a mixed sentiment as reveal by investdata sentiment report showing 41% ‘buy’ volume and 59% sell position. Money Flow Index looking up to 61.67bps, from the previous week’s 53.88points, an indication that funds entered the market on a weekly chart to reflect positioning, despite profit taking in some stocks.

NGX index’s action maintained an uptrend, after forming a V shape chart pattern on a weekly time frame, irrespective of profit taking, as buyers and sellers fight for dominance to trade above the T-line and 200-DMA, reaching a topping level that signaled reversal or continuation of trend, depending on market forces, as index is heading for 52,000 mark, that needs confirmation as trading opens. We note that the volume that supported this recovery and rally remain mixed and above the market’s traded average, just as corporate actions and others could support the uptrend further in January.

Bullish Sectoral Indices

Sectorial performance indexes for the week closed green, safe for the NGX Industrial Goods that closed in red by 0.58%, while NGX Consumer goods led the advancers’ after gaining 6.44%, followed by Banking, Insurance and Energy with 4.27%, 2.68% and 0.06% respectively.

Activities in volume and value were mixed, as investors exchanged 921.86m shares worth N27.15bn, compared to the previous week’s 1.88bn units valued at N18.99bn, with volume driven by Financial Services, Industrial goods and Conglomerates. Specifically, the week’s volume was driven by trades in FBNH, BUA Cement, GTCO, Sterling Bank and Transcorp.

John Holt and Nahco were the best-performing stocks during the week, gaining 20.55% and 15.63% respectively, closing at N0.88 and N7.40per share on market forces and expectation. On the flip side, Champion Breweries and CHI Plc lost 15.64% and 10.45% respectively, at N4.64 and N0.60 per share, purely on profit taking.

Outlook for the week

We expect a mixed trend and sentiment to continue ahead of the release of macroeconomic reports like December inflation data, Q4 GDP and Q4 unaudited accounts. Even as the market index eyes 52,000 psychological level in the new week, just as retracement to 50,578.12 mark and below is possible on selloffs as events unfold globally and domestically here in the midst of expected corporate actions and positioning for full year financials.

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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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605