Market Update for the Week Ended January 19 and Outlook for January 22-26

The bulls on the Nigerian Exchange went wild on a very strong buying sentiment for large cap stocks last week, as blue chip companies, among others pushed the composite 13.84% NGX All Share index higher. This was  a record, being the biggest weekly gain on the exchange since April 2014, amid a very high traded volume and buying pressure that made the NGX the world’s best performing stock market so far in 2024.

Market players continued their sector rotation and portfolio repositioning in the face of the ongoing earnings reporting season, as  two impressive unaudited 2023 full-year scorecards hit the market from Infinity Trust Mortgage Bank and Unilever Nigeria. Top and bottom lines translated to Earnings Per Share of  23kobo and N1.42 respectively.

The global economic outlook remains mixed with uncertainty arising from escalating geopolitical tensions as major central banks of the world continue to down play early rates cut, due to the resurgence of inflationary pressure in these matured economies as revealed by recent consumer price index data. There are also the mixed earnings reports hitting these markets. Already, markets across the globe are witnessing mixed trends and performance, despite, the positive sentiment and demand outlook for the tech stocks that supported advance markets in the midst of weak and disappointing macroeconomic indices. The MSCI World index was down by 0.4% for the week under review.

Market players should hedge against a potential downturn, correction and pullback, by not being fooled by the current rally as the NGX is at it again, with prices hitting new highs in the New Year. There is already a disconnection between the market and economic realities, as the monetary and fiscal authorities are yet to give a clear direction where they are heading with their policies and actions.

Investors and traders should wake up and trade intelligently and smart to avoid be trap in any position. This is no joke, it is exciting and scary time on the exchange today. Now is the time for action, for you to protect your investment or capital by taking profit and targeting defensive stocks that are stable and established, strong shareholding structure, relatively small outstanding shares, consistent in dividend payment and leaders in their sector or industry.

As you reduce your position in the market, also be on the lookout for trends and directions always, so that you will know when to take position again, because oscillation, volatility, meltdown and pullbacks creates opportunities to buy. So, increase your positions when the market pullbacks and buy more, if this inflationary pressure continues to boost stock prices.

With the market looking forward to more quarterly and unaudited 2023 full-year results from different quoted companies, during the week under review, the composite NGXASI hit another new all-time high of 94,538.12 basis points. This is coming ahead of the dividend season which continues to support buying sentiments in the face of volatility as investors and traders accumulate positions across the major sectors of the market and large cap companies.

The year 2024 started with high expectations, challenges and opportunities that are now creating wealth for discerning investors and smart traders, if government and monetary policies complement each other to put the economy in the path of recovery and progress, in order to support the current NGX growth performance.

The headline inflation report for December according to National Bureau of Statistics hit a three-decade high of 28.92% year-on-year from 28.22% in November, as a result of spending during the Christmas and New Year festivities which induced high prices of goods and services, imported inflation due to Naira depreciation, high cost transportation and energy. There are also the issues of sustained insecurity, especially in the North-East and North-West geopolitical zones that is still keeping farmers from their farms. This trend is likely to continue in January.

The NGX index’s action has sustained an uptrend in the first three trading weeks of the year due to the ongoing portfolio repositioning as investors hedge against inflation on the strength of the impressive corporate earnings.

Others include the outstanding numbers of shares, shareholding structure and dividend history, which impacted stock prices across board, while also reflecting in the very high volume of transactions and positive market breathe during the week. All attention has now moved to the policy agenda of the fiscal and monetary authorities with high hopes that they would fix the economy or put it on recovery path quickly.  As we look forward to the first MPC meeting of the new CBN governor now that meeting time table for the year is available.

To navigate the rest of Q1 market volatility and its mixed outlook profitably using fundamental and technical analysis to run, join Investdata’s Live Sessions at noon every Mondays, Wednesdays and Fridays, also get investdata Technical Toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent breakout of bullish channel to continue the markup phase. As volume of transaction witnessed within the week remain high traded volume, it is time to go shopping for undervalued stocks, sectors and the next insider dealing opportunity.

Oil price during the week under review oscillated to record a weekly gain at $78.29 per barrel following the persistent tensions in Middle East and disruption in oil output as a result of winter weather affecting US production in the face of mixed global macroeconomic data as inflation resurfaced. As oil demand outlook remains mixed in the midst of uncertainty around rate cut in 2024. Just as Russia-Ukraine war has lingered over two year now, and is indeed escalating. The up and down movement of oil prices also continues to drive volatility across different investment windows.

Movement Of NGXASI

The NGX’s bull run was heightened with five straight trading sessions of buying sentiment and positive momentum to extend the three weeks of positive outing in the new year, on a very high traded volume and buying sentiment. There are also the renewed buying interest in the industrial, consumer goods and energy sectors that further supported the market for the period under review.

Trading for the week started on a positive note, extending the previous session’s gain by 1.92% and was sustained on Tuesday when the composite index rose significantly by 3.93%. Trading during the remaining days of the week closed 2.38%, 2.04% and 2.87% respectively in the green on accumulation of Dangote Cement, BUA Cement and Seplat for Wednesday, Thursday and Friday. This brought the week’s total gain to 13.84%, compared to the previous week’s 4.24% positive position.

Consequently, the key performance NGXASI soared sharply by 11,495.16 basis points, closing at 94,538.12bps, compared to the week’s 83,042.96 bps opening level, after breaking through various psychological lines to intra-week high of 94,538.12bps and a low of 82,949.40bps. Market capitalisation also rose by N6.3.tr to N51.7tr representing a 13.84% value gain.

The week’s top advancers’ table were dominated by low, medium and large cap stocks in the midst of buying sentiment in blue chip companies, dividend paying stocks among others. Also notable was the fact that traders were taking advantage of the up market to cash out profit and reposition in stocks with high upside potential ahead of their earnings reports, despite some stocks are hitting new highs.

Market technicals for the period was positive and strong as advancers outnumbered decliners in the ratio of 81:58 on buying pressure as revealed by investdata sentiment report showing 100% ‘buy’ volume and 0% sell position. Money Flow Index was looking flat at the  highest level to show entrance of money  into equity at 100bps from the previous week’s 100 points, an indication that funds hit the market on a weekly timeframe.

Technical View

The NGX bullish pattern continued after breaking out the 90,000 psychological point and various  mark of 91,000, 92,000, 93,000 and 94,000 to close the period at  94,538.12bps on a very high traded volume that revealed accumulation of position by smart money in the face of high volatility and profit taking, while position trading is ongoing by investors increasing their holdings, as the market trades above the T-line on a daily, weekly and monthly time frame to sustained its uptrend in the midst of positive sentiment and buying interest. We note also that the index is trading above the 200-day moving average on the weekly time frame.

Bullish Sectoral Indices

The sectorial indexes closed higher, save for NGX Banking that closed 0.12% lower, while the NGX Industrial Goods index led the advancers after gaining 46.88%, followed by Insurance, Energy and Consumer goods with 14.94%, 8.82% and 8.18% respectively.

Transactions in volume and value were down, as players exchanged 5.18bn shares worth N77.80bn, compared to the previous week’s 5.72bn units valued at N88.83bn. Volume was driven by Financial Services, Conglomerates and Consumer Goods Industry. This was boosted specifically by trading in Transcorp, Jaiz Bank, Aiico, Wema Bank and Accesscorp.

The Initiates Plc and Dangote Cement were the  best performing stocks for the week, after gaining 59.78% and 53.94% respectively, and closing at N2.94 and N538.80per share on market sentiments and earnings expectation. On the flip side, Royal Exchange and Ikeja Hotel lost 22.45%and 10.57% respectively, at N0.76 and N7.70 per share, purely on selloffs and profit taking.

Outlook for the week

We expect mixed sentiment on profit taking and reactions to the earnings reports inflow, as market players target fundamentally sound stocks ahead of January consumer price index and February MPC meeting in the face of depreciating naira that made NGX stocks cheaper and rising inflation. Also, the market awaits the steps government would take to resolve the county’s lingering FX challenges.

However, retracement to the 84,559.46bps level and below is possible on profit taking as global and domestic events unfold.

Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605