Market Update for December 15
The see-saw movement in Nigerian equity prices resurfaced again at the midweek, with the benchmark NGX All Share Index closing marginally higher, halting the previous negative outing on investors buying interest in consumer and industrial goods. On Wednesday also, the National Bureau of Statistics released data showing a further decline in the consumer price index to a one-year low, after recording eight consecutive months of decline to print 15.40% from 15.89%, due to the supportive base effect, as month-on-month inflation was up to reflect the high prices of goods and services during a festive period like this.
Specifically, food inflation tapered by 1.09 bpts YoY to 17.21%, despite the festivity induced demand pressure on the MoM food inflation, while the core inflation was up by 61 bps, reflecting continued price pressure on cooking gas. Notable price increases were seen on 93% of the core inflation sub-components, with HWEGF and Restaurant & Hotels leading the pack. As moderation in inflation and the fourth wave of COVID-19 could trigger an adjustment in the Monetary Policy Rate to 11% at the January meeting of the CBN Min order to sustain this fragile economic recovery to start the year 2022.
The seeming positive sentiment and mixed trend among the sectorial indexes revealed the rekindled interests among investors on a low traded volume and positive market breadth in the midst of a continued decline in TB primary auction rates across all the tenors like 91-day, 182-day, and 364-day, printing at 2.49%, 3.45%, and 5% respectively.
The prevailing low transaction volume reveals the absence of institutional players in the market and the expectation of institutional investors ahead of year-end repositioning which may push the NGX index action above the 44,000 basis points’ mark, with the help of high cap stocks that are likely to close the year higher.
This means that the retail space is not being singled out, as profit-taking is still evident across the major indexes, following which if there is going to be a Santa rally this year, we can watch for signs that the NGX-30 can hold these recent highs along with other key sectors.
Technically, the NGX index’s action has reversed on buying sentiments among blue-chip companies and dividend-paying stocks, as momentum indicators for the day were mixed, while the ADX is reading 31.49, RSI at 49.32, and Money Flow Index was flat at 33.98 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds into equity space as fixed income market yields remain unclear.
Meanwhile, midweek’s trading opened slightly on the upside and was sustained throughout the day, despite fluctuating on demand for blue-chips with a consistent history of dividend payments, a situation that pushed the NGX index to an intraday high of 42,374.92 basis points from its lows of 42,294.66bps and thereafter close above its opening point at 42,357.36bps.
Market technicals for the session were positive and mixed as volume traded was lower than the previous day’s in the midst of breadth favouring the bulls on positive sentiment as revealed by Investdata’s Sentiment Report showing 78% buy position and 22% sell volume. The total transaction volume index stood at 0.72 points, just as the energy behind the day’s performance remained relatively weak and flat, as the money Flow Index read 33.98 points, from the previous day’s 33.68points, indicating that funds entered the market.
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Index and Mkt Cap Movement
At the end of Wednesday’strading, the composite index inched up 39.84 basis points, at 42,357.36bps after opening at 41,4317.52bps, representing a 0.10% up, just as market capitalization rose by N20.80bn, closing at N22.10tr, from the opening value of N22.08tr, also representing 0.10% appreciation in value.
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Midweek’s upturn was driven by demand in stocks like MTN Nigeria, GTCO, Zenith Bank, Access Bank, Vitafoam, FBNH, United Capital, Dangote Sugar, UBA, Ecobank Transnational Incorporated, and NB, among others, which impacted mildly on Year-To-Date gain, raising it to 5.18%. Market capitalization stood at N1.11tr YTD, representing a 4.95% growth from the year’s opening value.
Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Consumer Goods and Insurance closed 0.22% and 0.08% higher respectively, while the NGX Banking led the decliners, after losing 0.20%, followed by Industrial Goods and Oil/Gas with 0.11% and 0.05% respectively.
Market breadth turned positive as advancers outnumbered decliners in the ratio of 19:13, while activities in volume and value terms were mixed after investors exchanged 226.18m shares worth N2.63bn, compared to the previous day’s 270.09m units valued at N2.30bn. Volume was driven by trades in International Breweries, FBNH, GTCO, Unilever and Mutual Benefits Assurance.
Redstar Express and Meyer were the best-performing after gaining 7.96% and 7.69% respectively, closing at N3.40 and N0.42per share respectively on market forces. On the flip side, Etranzact and Royal Exchange Assurance lost 9.57% and 4.76% respectively, closing at N1.89 and N0.60 per share, purely on selloffs and profit-taking.
Market Outlook
We expect a mixed trend as market players digest the November consumer price index and a further decline in primary TB auction rates in the midst of ongoing FGN bond offer 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 seasonality likely to influence stock prices ahead of year-end window dressing.
The relatively low volume traded in the midst of retracement is 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
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
