Mixed Trend Still, As Investors Bet On Q4, Full-Year Audited Reports

Market Update for January 13

Trading activities on the Nigerian Exchange on Thursday witnessed mixed trend and sentiments to record two positive sessions and two negative outings for the week so far, as the key performance index failed to sustain the previous day’s upbeat due to selloffs in insurance stocks and profit-taking that hit highly capitalized companies which rallied recently.

Despite the profit taking moves by traders in the market which led to a flat close in the NGX All-Share index and slight negative breadth on a less than average traded volume that signaled the reduced play by institutional investors, as the year still new. Meanwhile, all eyes are on 2021 corporate financials releases that would start hitting the market any moment from now.

In any market condition, there is opportunity for discerning and intelligent investors, meaning there is always a bull sector or industry somewhere, even when stocks are witnessing selloffs everywhere else.

There will be money to make somewhere. If the NGX is down, one sector might be up, but these things don’t just change every day. They go in trends and sector management or rotation is the key to finding the best stocks and sectors that will go up, not just for a day or week, but for months and years.

How does it work, because 80% of gains come from being in the right sector, while another 80% of the gains from a stock is made because of the sector it is in. The more a sector gets into favour, the higher the PE ratio in that sector. That is why market correction, or pullbacks are always as much as 35 to 50% sometimes. It’s because PEs really reflect price.

The PE of many stocks today are below 15, suggesting that these stocks have high upside potentials.

Technically, the NGX index’s action had a marginal pullback on a low traded volume to slowdown recovery, halting the bull run as revealed by the candlestick at the end of the day’s trading, despite the index trading above the 20 and 50-Day Moving Average.

Momentum indicators for the day were positive and mixed, just as the ADX read 32.94, RSI closed above 50 at 75.41 and Money Flow Index fell to 73.76 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 and flat, with the first TB auction in 2022 opening Wednesday.

Thursday’s trading started slightly in the green before pulling back on profit booking in Custodian Investment, United Capital and Stanbic IBTC among others, which pushed the benchmark index to an intraday low of 44,582.61 basis points, from its highs of 44,621.66bps. Thereafter, the index closed slightly below its opening point at 44,604.74bps.

Market technicals were weak and mixed as volume traded was higher than the previous day’s in the midst of negative breadth and mixed sentiment as revealed by Investdata’s Sentiment Report showing 57% buy volume and 43% buy position. The total transaction volume index stood at 0.95 points, just as the energy behind the day’s performance remained relatively strong.

Money Flow Index was up at 73.76points, from the previous day’s 66.70points.  

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Index and Mkt Cap Movement 

The composite Index NGXASI, at the end of the day trading, slipped 4.08 basis points, at 44,604.74bps, after opening at 44,608.84bps, representing a 0.01% drop. Market capitalization fell by N2.20bn, closing at N24.03tr, from the opening value of N24.03tr, also representing 0.01% value loss.

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The downturn was attributed to selloffs in Stanbic IBTC, Ucap, UACN, NEM, Custodian Invest , Honeywell and UBN, among others. This impacted mildly on Year-To-Date gain which rose to 4.43%. Market capitalization is up N2.01tr YTD, representing a 6.20% from the opening level for the year.

Mixed Sector Indices 
Performance indexes across the sectors were mixed, as the NGX Insurance index closed lower by 0.93%, while the NGX Consumer Goods index led the advancers, after gaining 0.16%, followed by Banking with 0.07%.

Just as Industrial goods and Energy closed flat.

Market breadth turned slightly negative as losers outpaced gainers in the ratio of 15:14, while activities in volume and value terms were mixed after players exchanged 321.75m shares worth N3.66bn, compared to previous day’s 266.35 m units valued at N3.82b.

Volume was driven by trades in Transcorp, Jaiz Bank, Mutual Benefits Assurance, FBNH and GTCO.

Transcorp and Consolidated Hallmark Insurance were the best-performing stocks for the day gaining 9.71% and 7.94% respectively, and closing at N1.13 and N0.68 per share respectively, on market sentiments and forces.

On the flip side, NEM Insurance and Custodian Investment lost 10% and 9.49% respectively, closing at N3.96 and N7.15 per share, purely on selloffs and profit taking.

Market Outlook
We expect mixed trend to continue on Dangote Cement’s buyback announcement 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.

As all eyes are on December consumer price index and other economic data. Also noteworthy is the first TB auction rates inched up to signal possibility of uptick fixed income rates, as oil prices remain above $82 at the international market, 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