NGX Index Hits New All-Time High On High Cap Stocks Rally, Money Flow Divergence

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The Nigerian equity market is no doubt is no-doubt giving investors and traders a reason to worry, especially given the latest inflation data from the country’s National Bureau of Statistics (NBS), given the changing outlook of fixed income market yields.

Nigeria’s January inflation rate inched even closer to 30% at 29.9% from 28.92% in December 2023, thereby supporting the disposition of the Monetary Policy Committee chairman/Central Bank of Nigeria governor to rate hike at the upcoming meeting. The outcome of the MPC meeting is a threat to the equity market’s performance if rates inch up, notwithstanding what the expected corporate earnings and dividend announcements look like.

Nonetheless, the continued rally by the Nigerian Exchange (NGX) is a disconnect from macroeconomic realities in the face of an unclear directions of the country’s fiscal and monetary policies, as reflected in the rising economic headwinds within the system.

Momentum indicators remain mixed as the ADX and Money Flow Index continue to look down, while the NGX index’s action makes new highs, signaling that a bearish divergence is underway in the midst of earnings and dividend season. Market stakeholders have seemingly embraced the sustained volatility and anxiety in equally measure because key levels give us the highest odds setup ahead of the forthcoming FGN Savings Bond and Treasury Bills’ primary auction.
With 2024 being a post-election year, the policy direction of the government remains unpredictable and unclear in an environment where prices of goods and services are hitting the roofs due to imported inflation arising from FX challenges, high production and transportation costs in the face of rising insecurity and policy summersault.

The gloomy economic situation signals the onset of yet another recession in Nigeria, in what is becoming an uncertain time and season, which offer opportunities for discerning investors and smart traders. One the early filers on the NGX, Nigerian Breweries, released a negative audited results without corporate action due to a huge foreign exchange challenges, weak purchasing and savings power of Nigerians resulting from the runaway inflationary environment.

However, let the index, price action and chart patterns below guide your trading decision as more audited numbers hit the market next week.

NGXASI Weekly Chart (Opening chart)

NGX BANKING Weekly Chart