Mixed Trend Ahead On Dangote Cement Buyback, Inflation Upsurge, MPC Outcome

Market Update for January 17
It was a very volatile session on the Nigerian Exchange, as the week started on a negative note. The benchmark index extended its bearish transition for the third consecutive day on a low traded volume to signal a new downtrend on selloffs and profit taking that hit banking stocks and highly capitalized equities.

Despite the profit taking moves by traders in the market which led to another pullback after the index touched its four-year high at 44,768.94 basis points on rekindled buying interests in BUA Cement that pushed it price to N73.50 before closing the session at N70.00.

The cement manufacturer and others in that sector or industry recently enjoyed patronage as the government increased its capital expenditure to address the nation’s infrastructural gap and housing problems. It is noteworthy that the high demand for its products in the face of price increments will further boost bottom line.

Already, market players look to corporate earnings for a change in market direction in the midst of the just released December consumer price index which rose to 15.62% from 15 40% in November.

Other indicators that would guide decisions at this time include oil price at the international market hitting a seven-year high of $87.33 since 2014, and the 2021 corporate earnings releases that would start hitting the market any moment from now.

In any market of the world, policy plays a very important role such as guiding investors’ decision any time, especially now that all eyes are on the year’s MPC meeting next week to shape decisions and flow of funds, as some expert are calling for hike in MPR. This, to us, in Investdata is early for an economy that is still struggling in its recovery move that is weak, looking at high rate of unemployment, low purchasing power, high cost of living and distortion of Covid 19 that is ongoing with omicron. So its left for our economic managers and policy makers to formulate economic model that work for our environment not copying the mature economies.

Technically, the NGX index’s action had pulled back on a low traded volume to slowdown recovery and create buy opportunity as bear run persists. Trade metrics and candlestick at the end the session revealed selling pressure that supports a downtrend, despite NGX index trades above the 20 and 50-Day Moving Average.

Momentum indicators for the day were positive and mixed, just as the ADX read 36.17, RSI closed above 50 at 70.71 and Money Flow Index inched up to read 75.05 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and flow of funds into the equity space, as the fixed income market yields direction remains unclear, with inflation looking up at 15.62%.

Meanwhile, Monday’s trading opened slightly in the upside, and rallied up till midday before pulling back on profit booking in BUA Foods, Lafarge, NGXGroup and some banking stocks, that pushed the overall index to an intraday low of 44,390.49 basis points, from its highs of 44,768.94bps.

Thereafter, the index closed slightly below its opening point at 44,399.65bps.
Market technicals were weak and mixed as volume traded was lower than the previous day’s in the midst of a negative breadth and negative sentiment as revealed by Investdata’s Sentiment Report showing 98% sell volume and 2% buy position. The total transaction volume index stood at 0.63 points, just as the energy behind the day’s performance remained relatively strong.

Money Flow Index was up at 75.05points, from the previous day’s 70.80points.  

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Index and Mkt Cap Movement 
The composite Index NGXASI, at the end of the day trading slipped 55.02basis points, at 44,399.65bps, after opening at 44,454.67bps, representing a 0.12% drop. Market capitalization fell by N29.64bn, closing at N23.92tr, from the opening value of N24.95tr, also representing 0.12% value loss.

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Monday downturn was attributed to selloffs and profit booking in BUA Foods, FBNH, GTCO, Lafarge, Fidson, United Capital, PZ, UBA, International Breweries, NGXGroup, and Transcorp, among others. This impacted mildly on Year-To-Date gain which rose to 3.94%. Market capitalization growth stood at N1.85tr YTD, representing a 5.67% from the opening level for the year.

Mixed Sector Indices 
Performance indexes across the sectors were mixed, as the NGX Insurance and Banking indexes closed 0.19% and 0.08% lower respectively, while the NGX Industrial Goods index led the advancers, after gaining 0.81%, followed by Oil/Gas and Consumer Goods with 0.21% and 0.20% respectively.

Market breadth was negative as losers outpaced gainers in the ratio of 22:15, while activities in volume and value terms were down after players exchanged 214.31m shares worth N2.69bn, compared to previous day’s 405.73 m units valued at N0.83b. Volume was driven by trades in Transcorp, FBNH, GTCO, Zenith Bank and Fidelity Bank.

Sunu Assurance and Eterna were the best performing stocks for the day after gaining 9.68% and 6.98% respectively, closing at N0.34 and N6.00 per share respectively, on market sentiments and forces. On the flip side, Veritaskap and Mutual Benefits Assurance lost 8.70% and 7.41% respectively, closing at N0.21 and N0.25 per share, purely on profit taking.

Market Outlook
We expect mixed trend to continue on Dangote Cement’s buyback within the week and repositioning in dividend paying stocks ahead of 2021 Q4 and full year unaudited earnings reports that may start hitting the market any moment from now. With all eyes on MPC meeting outcome, as inflation reversed up to 15.62% and other economic data. Also noteworthy is the oil price that remains above $74 projection IMF at $87.33, while the International Monetary Fund is calling for hike in interest rate and further devaluation of Naira.

Already, two companies made their corporate actions available to the market, announcing a growth in their dividend payout to reflect the numbers posted.  Also, inflow into equity space is looking up slowly on changing investment decision to keep this trend ahead of new year holiday. 

As market players digest economic data and happenings in fixed income market 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 the new January Effect pattern likely to influence stock prices ahead of 2021 earnings reporting season.
The relatively low volume traded in the midst of uptrend and recovery moves are 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
Tel: 08028164085, 08179547605

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