Market Update for the Week Ended December 15 and Outlook for Dec 18-22

Friday ended yet another bullish week on the Nigerian Exchange, as banking stocks ushered in the Santa Claus rally, extending the positive outing for the eighth successive week on increased buying sentiments and strong momentum. These pushed the benchmark NGX All-Share Index to a new all-time high, as it closed above the 72,000 psychological line in the face of ongoing seasonality, portfolio rebalancing and the prevailing  disconnection of the market from the nation’s economic realities as revealed by the weak macroeconomic data and persistent headwinds in the system.

Notwithstanding the weak economic data and mixed outlook in the fixed income market and the decline in the last Treasury Bills auction rates/yields across the all tenors in the midst of rising inflation which has triggered more inflows into the equity space. Already, the Q3 corporate earnings of listed companies, especially the service providers have signaled the possibility of high dividends alongside capital gains on the shorter time frame as investors hedge against the raging hyperinflation. Other competing investment windows continue to record real negative returns as inflation approaches a two-decade high of 28.20% in November 2023. This number released by Nigeria’s National Bureau of Statistics (NBS) is tsimilar to the Consumer price index as recorded in August 2005. It marks the highest point since July 1996.

The positive momentum indicators during the week despite the less than average traded volume signals the wait and see attitude of market players especially the institutional investors that are holding on their position as the equity market beat inflation to create value in their portfolio ahead of year end.  NGX slowing down on Friday after a new all-time high, pulling back on profit taking on stocks that hits new 52 week as revealed by Friday’s candlestick formation to trade above the T-line on a weekly time frame remained strong. Even as the OBV and EMA 20 signaled continuation of trend and pullbacks that are underway before the year 2023 draws to a close, this calls for cautious trading and repositioning for 2024.

The current print makes Nigeria the 6^th country with the highest inflation reading in Africa, outpacing Ghana, Zimbabwe, etc. In the review period, Food inflation was the biggest pressure point, reflecting front-loading for year-end festive activities. Although core inflation moderated slightly by 15bps to 22.6% YoY, we noticed that pressures are still prevalent, evinced by the rising MoM numbers. To our minds, with energy costs still elevated and currency volatile persisting, we expect a higher core level in the ultimate month of the year. We project inflation to close the year at 28.9% YoY before peaking at 30.0% in the first quarter of 2024. We see legroom for further tightening in the early part of 2024, which is consistent with the forward guidance of the CBN, at the detriment of the economy that is already weak and shaking.

As the year gradually draws to a close, market players should take advantage of the ongoing seasonality and portfolio rebalancing to take profit and position in dividend paying companies and defensive stocks as NGX rally in a markup phase of the market ahead of 2024 earnings reporting and dividend season, as the year 2024 is already setting up with challenges and opportunities, so join us at Q1 Master Class to Secure your Financial Future in 2024 through Investdata Master Classes With Ambrose Omordion.

There are material shifts in the NGX index’s action as it makes a new all-time high, due to the ongoing portfolio rebalancing to hedge against inflation and market downturn on the strength of the impressive corporate earnings, outstanding numbers of share, shareholding structure and dividend history ahead of year-end Santa Claus rally and window dressing. These impacted stock prices across the board, while also reflecting on the volume of transactions and positive market breathe for 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. The disconnection of the market and economy continues to linger in the face of market volatility and weak economic activities.

The NGX remains above the T-line and 72,000 mark on a daily, weekly and monthly charts, as it breakout the psychological line amid buying interests in low priced stocks, large cap and blue-chip companies, which pushed the indicators higher in the midst of loss than average traded volume. This confirm accumulation and markup phase of the market. The seeming low volume of transaction in the market is also an indication that smart money are already in the market that supported the rally. These, notwithstanding, we urge investors to wait and confirm continuation trend, with bargain hunters already taking advantage of the pullback, low valuation and in the face of buying interest and profit taking to accumulate position.

To navigate the rest of the year market volatility and its mixed outlook profitably using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “and 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 consolidation. As volume of transaction witnessed within the week remain above the average 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 and rebound to trade at $76.55per barrel in the midst of weak US dollar and fed maintaining rates unchanged, even as middle east conflict takes another dimension and mixed global macroeconomic data. As oil demand outlook remains mixed, despite the seeming cooling inflation and signal of rate cut in 2024. We note also the rising geopolitical tensions across the globe and supply disruptions longer, due to the Russia-Ukraine war that has lingered for more than a year, 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 had a bullish week of four trading sessions of up markets and one down market of profit booking, as the key performance NGX All-Share index closed higher to extend the positive momentum and outing for eight consecutive weeks on a low traded volume and buying sentiment. Even as the banking sector outperformed the market and other major sectors, despite the seeming profit taking witnessed on the last trading session of the week.

Trading for the week started on a positive note, extending the previous gains after chalking 0.18%, which was sustained on Tuesday, midweek and Thursday inching up with 0.33%, 0.55% and 0.22% respectively on the impact of demand on banking stocks and others, before pulling back on Friday, following cash out of gains by traders. This brought the week’s total gain to 1.18%, compared to the previous week’s 0.17% positive position.

In all these, the composite NGX All-Share index gained 847.49 basis points, closing at 72,389.23bps, compared to the week’s 71,541.74bps opening level, after touching an intra-week high of 72,671.03bps and a low of 71,503.35bps. Market capitalisation also rose by N463.8 billion to N39.6 trillion representing a 1.18% appreciation in value.

The top advancers’ table for the week was dominated by low priced and medium cap stocks amid the buying sentiment in blue chip companies in the face of high volatility. Also notable is the fact that investors are taking advantage of the price oscillation and low valuation to buy into value and high dividend yield companies.

Market technicals for the period was positive and strong as gainers outpaced losers in the ratio of 48:32 on buying sentiments as revealed by investdata sentiment report showing 76% ‘buy’ volume and 24% sell position. Money Flow Index was looking flat at 86.46bps from the previous week’s 86.71 points, an indication that funds were in the market on a weekly timeframe.

Technical View

NGX index’s action broke out the strong resistance level of 71,866.37 and consolidation range to test 72,671.03bps on the weekly chart and on relatively low  traded volume signaling  the  continue holding 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 momentum. We note also that the index is trading above the 200-day moving average on the weekly time frame.

Mixed Sectoral Indices

The sectorial performance indexes were mixed, as the NGX Insurance and Oil/Gas close lower by 1.0% and 0.30% respectively, while the NGX Banking led the advancers’ after gaining 7.01%, followed by Industrial and Consumer goods with 0.24% and 0.22% respectively.

Transactions in volume and value were down, as players exchanged 1.88bn shares worth N31.63bn, compared to the previous week’s 2.42bn units valued at N45.07bn. Volume was driven by Financial Services, Services Industry and Consumer goods industry. The was boosted specifically by trading in Accesscorp, GTCO, Zenith Bank, Veritas Kapital and Transcorp.

Infinity Trust Mortgage Bank and SCOA were the best performing stocks for the week, gaining 59.32% and 28.89% respectively, and closing at N2.82 and N1.74 per share on market sentiments and forces. On the flip side, Secure Ekectronic Tech and Eterna lost 16%and 11.83% respectively, at N0.63 and N11.55 per share, purely on profit taking.

Outlook for the week

We expect mixed sentiment as Santa rally continue on strategic positioning and profit booking ahead of 2024 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, even as Moody’s upgraded Nigeria’s outlook to positive from stable.

However, retracement to the 68,559.46bps level and below is possible on profit taking as global and domestic events unfold.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605