Mixed Trends Ahead, As Investors React To Downgrade, NGXASI Eyes Psychological Level

Market Update for the Week Ended February 3 and Outlook for Feb 6-10

The nation’s equity market booked a positive sentiment last week thereby extending the bullish upbeat for the fourth consecutive weeks on a very high traded volume and positive market breadth in the face of better than expected unaudited corporate earnings and expected dividend announcement. All eyes are on the early filers to start releasing their scorecards and corporate actions any moment to give market direction.
The NGX Index’s action broke out a strong resistance level of 52,753.28 points and 54,000 psychological line on a very high volume and buying pressure after wo weeks of sideways movement due to profit taking and price correction to form a toping chart pattern that support reversal and continuation of trend depending market forces in the new week, as more audited earnings are expected to hit the market in coming days and weeks.
As the market heads for its 15-year high on the strength of the outstanding performance of listed companies which is expected to influence equity prices and support final dividend payment in the face of mixed macrocosmic condition, changing yields environment and the prevailing political uncertainty around the general election which begins in a matter of days. We note also that a material change in rates and price behavior may support uptrend further, even as technical tools are revealing the last minutes’ price markup by smart money or institution investors. So, let waits for confirmation as Monday trading opens.
The buying pressure and positive sentiment across the major sectors and other indexes of the market supported the rally as all eyes are on corporate earnings and actions, knowing that the short and medium-term trends are still intact, but this week trading will give a clear direction as more companies release their scorecards and react positively as these numbers are given insight of what investors should expect as dividend from the companies. This may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the elections, and the possibility of a post-election rally, if every things goes well.
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Oil price during the week continues its oscillation, to pullback below $80, as it trades at $79.94 per barrel as Iran help Venezuela to overhaul its major refinery complex and Europeans gas cut could linger to next year. Just as recovery in China economy and weak dollar could help avert recession in the midst rate hike slowing down in US and others climates due to inflation easing across the globe. We note also the geopolitical tensions and supply tightening due to the Russia-Ukraine war which has lingered for almost a year, having broken out on February 24, 2022. The up and down movement of oil price also continues to drive volatility across the globe.

Movement Of NGXASI
Bullish sentiments dominated the week’s trading with the NGX recording five trading sessions of up market, following position taking on the strength of earnings released so far that beat market expectation. Price appreciation of highly capitalized stocks and blue chip companies also supported the key performable index to close higher, after breaking out the 54,000 level on a buying interest in dividend paying stocks with stronger earnings
Trading for period under review, started on a positive note, reversing the loss recorded I the previous session, chalking 0.95%, a trend that was sustained throughout the week when the market inched by 0.22%, 0.49%, 0.93% and 0.40% respectively on Tuesday, midweek, Thursday and Friday. These brought the week’s total gain to 2.95%, compared to the previous week’s 0.12% positive close.
Consequent, the benchmark NGX All-Share Index gained 1,555.21 basis points, closing at 55,213.09bps, compared to the week’s 52,657.88 points opening level, after touching an intra-week high of 54,213.09bps, from its lows of 52,639.28points. Similarly, market capitalisation rose by N847bn, also representing a 2.95% appreciation in value at N29.53tr, from the previous week’s N28.68tr,
Low, medium and high cap stocks topped the advancers table for the week, amid buying sentiments and position taking in dividend paying companies as volatility and portfolio repositioning continued. Also notable is the fact that market players were accumulating positions after seeing the unaudited results from different sectors ahead of their corporate actions. So buying into value, strong earnings and high dividend yield companies continued, as market recovery persist heading for 54,817.28 and 55,000 levels.
Market metrics revealed a positive breadth as advancers outnumbered decliners in the ratio of 55:27 on a buying pressure as indicated by investdata sentiment report showing 100% ‘buy’ volume and 0% sell position. Money Flow Index looking up to 83.50bps, from the previous week’s 74.81points, an indication that funds entered the market on a weekly chart to reflect buying interest in stocks, as yields in fixed income continued to decline.
The NGX index’s action maintained its bullish rally ahead of a major resistance level of 54,290.11points, following which a breakout will usher in its 15-year high, as market players look forward to a financial market, economic and political reset that will drive higher returns in 2023 and beyond. Just as the ‘V’ shape chart pattern on a weekly and daily time frame, indicates continuation of trend, profit taking and extreme volatility. Buyers continued to dominate and index trade above the T-line and other moving averages like 100, and 200. Even forming a topping chart at different levels of its recovery move from 43,418.26 that signaled reversal or continuation of trend, depending on market forces, as all eyes are on 2022 financials that will give direction 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 into early February.

Bullish Sectoral Indices
Sectorial performance indexes for the week closed higher, except for the NGX Consumer Goods that shed 0.42%, while NGX Energy led the advancers’ after gaining 9.16%, followed by Banking, Insurance and Industrial Goods with 2.49%, 0.27% and 0.13%respectively.
Activities in volume and value were up, as investors exchanged 3.79bn shares worth N27.595bn, compared to the previous week’s 756.77m units valued at N13.65bn. Volume was driven by Financial Services, Conglomerates and Consumer goods. Specifically, led by trades in Universal Insurance, GTCO, Zenith Bank, Dangote Sugar and Transcorp.
International Energy Insurance and NNFM were the best-performing stocks for the week, gaining 57.14% and 44.44% respectively, closing at N0.99 and N9.75 per share on market forces and impressive Q3 earnings report. On the flip side, Chams and Guinness s had 16.57%and 10% respectively, at N0.25 and N63.50 per share, purely on selloffs.

Outlook for the week
We expect a mixed trends and sentiments to continue as investors react to Moody’s downgrade of Nigeria’s economy on currency and debt crises and companies’ earnings reports. The market index is already eyeing the 53,000 psychological level in the new week. However, retracement to the 51,578.12 level and below is possible on profit taking as global and domestic events unfold.

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