Mixed Trend On Speculative Buying, Repositioning For Dividend Stocks, Earnings Season

Market Update for January 10

Nigerian stocks ended the first trading day of the week higher as the NGX

All Share Index extended it rally for the seventh straight session, amidst the seeming buying interest and profit taking among the highly capitalized equities that led to the marginal gain recorded on Monday.

This was after the index action had broken out the major resistance level of 44,068.72 to test its four-year high at 44, 345.64 points, before pulling back on selloffs in MTN Nigeria, even as volume was less than average, while market breadth was positive.

That notwithstanding, the sell sentiment and mixed trend across sectorial indexes, buying interests in Dangote Cement, ahead of the January 22, 2022 expiry of the share buyback approved by shareholders last year, and other dividend paying stocks ahead of the release of the 2021 financial reports, that continue to support the up market and sustain the bullish momentum, especially against the backdrop of the sustained positive sentiments in BUA Foods and high cap stocks that have fueled the market recovery so far in the new year.

Trading metrics for the session showed investors’ buying interests in BUA Foods, Dangote cement, Lafarge Africa, Vitafoam and financial stocks- United Capital, whichhit a new 52-week high ahead of its full-year result.

Speculative activities and deals continued among banking stocks, just as more fund managers and local investors return to the market, and are targeting dividend paying stocks that are undervalue, but with high upside potentials, like Access Bank, Zenith Bank, United Capital, Wapco, UBA, Eterna, Fidson, GSK, May/Baker and others.

Technically, the NGX index’s action was flat on a less than average traded volume, while recovery and bull transition continued as revealed by the candlestick at the end of the Monday’s trading, with negative sentiments.

The composite index remained above the 20 and 50-Day Moving Average. Momentum indicators for the day were positive and mixed, just as the ADX is reading 25.75, RSI above 50 at 69.93 and Money Flow Index looking up at 73.47 points on the daily chart.

The continuation of this trend depends largely the interplay of market forces and flow of funds into the equity space, as fixed income market yields direction remains unclear and flat, with the first TB auction in 2022 coming up at the midweek
Meanwhile, Monday’s trading opened slightly in the upside and rallied to four years high before pulling back in the afternoon on profit taking in telecoms giant MTNN, and other medium cap stocks, which pushed the NGX index down after touching intraday high of 44,345.64 basis points, from its lows of 43,354.42bps.

Thereafter, the index closed slightly above its opening point at 43,897.13bps.
Market technicals were positive and mixed as volume traded was lower than the previous day’s in the midst of positive breadth and selling sentiment as revealed by Investdata’s Sentiment Report showing 91% sell volume and 9% buy position. The total transaction volume index stood at 0.92 points, just as the momentum behind the day’s performance remained relatively strong.

Money Flow Index was up at 73.47points, from the previous day’s 67.54points.  
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Index and Mkt Cap Movement 
At the end of Monday’s trading, the benchmark NGXASI inched up by 42.71 basis points, at 43,897.13bps after opening at 43,854.42bps, representing a 0.10%up, just as market capitalization rose by N23.01bn, closing at N23.65tr, from the opening value of N23.63tr, also representing 0.10% value gain.

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Monday’s session upturn was driven by ‘buy’ interests in BUA Foods, Dangote cement, Vitafoam, Livestock Feeds, Lafsrge, Ucap, Access Bank, FBNH, Zenith Bank, UBA, Honeywell and Eterna, among others, which impacted mildly on Year-To-Date gain, raising it to 2.76%. Market capitalization growth stood at N1.60tr YTD, representing a 5.58% from the opening of the year.

Mixed Sector Indices 
Performance indexes across the sectors were mixed, as the NGX Insurance and Industrial Goods indexes closed 2.77% and 1.71% higher respectively, while the NGX Oil/Gas index led the decliners, after losing 0.58%, followed by Banking and Consumer Goods with 0.12% and 0.05% respectively.

Market breadth was positive as advancers outnumbered decliners in the ratio of 28:17, while activities in volume and value terms were down as stockbrokers crossed 311.25m shares worth N8.64bn, compared to previous day’s 395.15m units valued at N12.39b.

Volume was driven by trades in BUA Foods, Transcorp, Zenith Bank, GTCO and Sovereign Trust Insurance  
BUA Foods and MRS Oil were the best-performing stocks after gaining 9.96% and 9.72% respectively, closing at N58.50 and N13.55 per share respectively as investors positive sentiments for the newly listed food company continued.

On the flip side, NNFM and UBN at 9.66% and 6.96%, closing at N6.55 and N5.40 per share, purely on profit taking .

Market Outlook
We expect mixed trend on speculative buying into BUA Foods 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.

Just as the first TB auction in 2022 kicks off tomorrow, as the oil prices remain above $80 to trade at $81.72 in the international market.

At the time IMF 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 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
Tel: 08028164085, 08179547605

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