Market Update for the Week Ended January 21 and Outlook for January 24-28
Equity prices rallied on the strength of buying interests in telecoms and others sectors on the Nigerian Exchange, extending the three straight weeks of bullish transition as the composite index closed higher.
These happened on the back of the improved transaction volume and positive breadth, and ahead of the earnings reporting season, as well as the expected outcome of the Central Bank of Nigeria’s Monetary Policy Committee meeting begins on Monday, January 24, 2022.
Positive investors vibes continued on the exchange in the midst of headwinds in the macroeconomic environment and rising oil prices in the international market.
Despite the changing global economic trends and geopolitical unrests now influencing the commodities prices across the globe,
The nation’s economic recovery has persisted, despite being weak as revealed by the 0.50%, 5.01% and 4.03% GDP growth recorded in Q1, Q2 and Q3 respectively. This trend is likely to continue as investors look to the 2021 Q4 GDP data to confirm the state of the economy at the end of last quarter.
Economic data released during the week shows that, after eight consecutive months of declines in Consumer Price Index (CPI), headline Inflation rate rose by 23bps to 15.63% in December 2021, compared to 15.4% in the prior month, according to the official data released by Nigeria’s National Bureau of Statistics (NBS).
The increase in headline inflation was attributed to the surge in consumer spending following the December festive season, security concerns and depreciation of the Naira in the FX market as the two sub-indexes rose year-on-year.
Despite the gloomy picture and happenings in global markets as many closed either in red, or mixed, back home, the NGX All-Share Index rallied to 7.59% year-to-date, from its December 31, 2021 level.
This has further validated our position on the ‘January Effect rally’. The market has also broken out its five-year and 2018 strong resistance level to its 14-year high, on improved volume traded and positive sentiment, extending the new trend and characteristics that support an uptrend. The index action now looks to the 2008 all-time market high.
We expect economic fundamental, corporate earnings and actions shape the market in Q1. January’ positive performance, so far, is attributed to buying interests in Airtel Africa, MTN Nigeria, Seplat Energy, Dangote Cement, BUA Foods, Nestle and Zenith Bank, ahead of their full-year earnings reports that will hit the market any moment during this quarter.
The high volume of transactions and price actions reveal the presence of buyers and return of institutional players to the market after the holidays, as positive fundamentals and technical patterns reveal the undervalued state of the market and buying opportunities for discerning players
During the week, share prices of Airtel, Fidson Healthcare, Nahco and others hit their new 52-week high.
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Movement Of NGXASI
The NGX All-Share Index had a bullish week, comprising four sessions of up market and a day of loss, after the key performance index opened the period on a negative note shedding 0.12%. This was followed by a rebound on Tuesday when it gained 0.53% on a bull sentiment, which was extended to midweek when there was a sharp uptrend of 1.71% on buying interests in Airtel and Seplat.
The uptrend of Thursday and Friday were driven by Dangote Cement’s share buyback and buying interest in blue-chips that are consistent in dividend paying. The index gained 1.10% and 0.05% respectively on both days, bringing the week’s total gain to 3.4%, a significant improvement over previous week’s gain of 1.37%. Therefore, overall, the Year-to-Date returns stood at 7.59%.
In all, the benchmark index grew by 1,502.68 basis points, closing the week at 45,957.35bps, which incidental was the intra-week high, while touching a low of 44,352.61bps. The week opened with the index at 44,454.67bps.
Market capitalization increased by N809.62bn, closing at N24.76tr, compared to the previous week’s N23.95tr, which also represented a 3.4% appreciation in value.
For the first week in a long while, the top gainers’ table was dominated by medium and high priced stocks, as bargain hunters continued to take advantage of the breakouts to reshuffle their portfolio on the strength of the Q3 earnings reports, sectorial fundamental news and positive economic data.
We note that the NGX Index and price actions reveal the presence of buyers in the market, a situation that reflected on major sectoral indexes, just as gains in Seplat, Oando and Eterna boosted the Oil/Gas index.
Market breadth for the week was sharply positive on a high volume as a result position taking during the week, just as players expect historical trend patterns of January to support the recovery in the short to long-run, while investors increase their buying interests on dividend yields as fixed income market returns remain negative on uptick in inflation.
Gainers outnumbered losers in the ratio of 47:23, on buying sentiment as revealed by the investor sentiment report showing a 100% buy volume. Money Flow Index slipped to 75.41bps from the previous week’s 76.80 points, an indication that funds left the market despite the bull run.
NSEASI WEEKLY CHART MOVEMENT
Technically, the index action, on a weekly chart remained strong and bullish, as momentum indicators were mixed and strong on market forces. Just as the NGXASI is set to breakout another psychological line of 46,000 points. The candlestick formation at the end of the week trading revealed a strong bull position on a higher traded volume in the midst of buying sentiment. The candlestick pattern indicates a positive outing, and that the market recovery is still strong. Also, with all eyes on fixed income market yields and oil prices to further support market fundamentals and attract liquidity to the equity space. The NGX at this point is creating new buying opportunities for discerning investors.
Bullish Sectoral Indices
The sectorial performance indexes for the period were higher, except for the NGX Insurance that closed lower by 0.27%, while NGX Oil/Gas led the advancers after gaining 5.21%, followed by Industrial goods, Banking and Consumer goods with 4.37%, 1.66% and 1.03% respectively.
Transaction’s in volume and value terms were up as market players traded 1.86bn shares worth N47.49bn, compared to previous week’s 1.6bn units valued at N32.72bn. Volume was driven by Financial Services ICT and Conglomerates, particularly Computer Warehouse Group, Transcorp, FBN Holdings, Dangote Cement and GTCO.
Courteville Business Solution and NNFM were the best performing stocks for the week after gaining 24.32% and 20.61% respectively, closing at N0.46 and N7.90 per share respectively on positive market sentiment and forces. On the flip side, Veritas Kapital Assurance and Regency Assurance Plc lost 8.70% each, at N0.21 and N0.42 per share, purely on selloffs and profit taking.
Outlook for the week
We expect mixed sentiments on profit taking, bargain hunting, and dividend income positioning for the earnings reporting season that just kicked off ahead of the MPC meeting. It is noteworthy that over N129bn 9f FGN bond matures next week, with potential to push funds into the equity market.
Funds are likely to flow towards the better investment yield or return. We note also that funds and portfolio managers continue to take position on the strength of Q3 numbers ahead of 2021 financials. For now, many stocks remain within their buy ranges to attract funds into the equity space.
Also, investors will continue tracking yields movement in the fixed income market. Last week’s low volume suggests that institutional investors are not selling.
It is important also that oil price continues to oscillate in the international market, trading above $85 per barrel; corporate actions, as well as the Q4 unaudited numbers that are around the corner.
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