Market Update for the Week Ended January 28 and Outlook for January 31-Feb 4
The nation’s stock market rallied on increasing buying interests and positive sentiments, driven by impressive corporate quarterly and unaudited 2021 full-year earnings reports released to the market during the period. Despite the mixed trend and performance as a result of profit taking from capital gains recorded in the recent bull-run or uptrend and selloffs in Dangote Cement, after the just concluded share buyback exercise of the company.
The changing global economy has driven inflation, or consumer price index to its highest in recent years and triggered normalization of monetary policy in the mature economies which may lead to capital flight from the emerging economy.
But at the first Fed’s meeting 2022 during the week, members kept interest rates steady, as expected, just as global stock markets had a mixed performance over the week, with corporate earnings lifting global equities amid inflation, geopolitical concerns.
Back home, the CBN monetary policy committee (MPC) in its first meeting for the year voted to hold all policy parameters position. Specifically, the committee retained the Monetary Policy Rate (MPR) at 11.5%, the Asymmetric corridor around the MPR at +100/-700bps, the Cash Reserve Ratio (CRR) at 27.5%, and the Liquidity Ratio (LR) at 30.0%.
The committee was of the view that leaving all policy parameters unchanged will be beneficial in spurring economic growth. Also, during the week, NTB primary market auction was held and rates in the short and long tenor decline as shown in the table below:
The outcome of the above two events have influenced the local equity market as NGX All-Share Index rallied to 8.17% 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 several resistance level and psychological lines 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 50,000 mark after it recently broke out 46,000 psychological line to test the 46,905.63 basis pionts on price appreciation of Airtel and Dangote Cement, before the building materials sector leader suffered losses on profit booking and selloffs.
We expect economic fundamentals, corporate earnings and actions shape the market in February, amid the influx of quarterly and full-year unaudited accounts to give investors an insight into what should be expected from different sectors and individual companies. These numbers with company payout ratios should give investors an idea of final dividend expected from audited accounts.
This is based on the fact that the difference in these unaudited and audited accounts are often small. January’s positive performance, so far, is attributable to buying interests in heavyweights like Airtel Africa, MTNN, BUA Cement, Seplat Energy, Dangote Cement, BUA Foods, Nestle, Zenith Bank and Ecobank Transnational Incorporated, ahead of their full-year earnings reports expected in the market any moment during this quarter.
The above-average traded volume and price actions for the period under review reveals the presence of buyers and return of institutional players to the markmarketplace. We note the prevailing positive fundamentals and technical patterns that signal the undervalued state of the market and buying opportunities on offer for discerning players.
During the week, share prices of Total Energies, ETI, NPF Microfinance, Votafoam, Airtel, Fidson Healthcare, Nahco, Julius Beger, and Access Bank, among others hit their new 52-week high. To navigate the new year profitably, order for Investdata’s video on Technical Toolbox for Buy & Sell Decision Home Study Pack to enhance trading results and boost your bottom line. Also, to up your game in equity trading and investing, understanding the key to trading price and index actions will go a long way to make the difference in your trading results. Checkout the video materials below.
Movement Of NGXASI
The benchmark All-Share Index (ASI) had a mixed trend to sustained its bullish outing from the prior week. It opened the period on a negative note, losing a marginal 0.07%, which was reversed on Tuesday when the index recovered 0.12%. This trend was sustained at the midweek’s session, when the market advanced sharply by 1.71% on buying interests in telecoms giants- Airtel and other blue-chips, before suffering a 1.12% pullback on Thursday due to profit taking in Dangote Cement and others.
The NGXASI reversed up again on Friday as more impressive corporate quarterly and unaudited 2021 earnings reports hit the market pushing prices up on increased volatility, positive sentiment and momentum. This brought the week’s total gain to 0.55%, against previous week’s 3.4%.
Consequently, the key performance index grew by 247.70 basis points, closing the week at 46,205.05bps, after touching intra-week high of 46,905.63 points, from its low of 45,898.24bps. Recall that the week opened with the index at 45,957.35bps. Market capitalization increased by N137bn, closing at N24.90tr, compared to the previous week’s N24.76tr, which also represented a 0.54% value gain.
The top gainers’ chart for the week was dominated by low and medium cap stocks, as bargain hunters continued to take advantage of the breakouts and impressive earnings reports to reposition their portfolio on the strength of the Q4 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 ETI, Zenith Bank, UBA, and Access Bank boosted the banking index.
Market breadth for the week remained positive on an above average traded volume as a result increased buying interests 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 position on dividend yields as fixed income market returns remain negative on uptick in inflation. Advancers outnumbered decliners in the ratio of 44:33, on selling sentiment as revealed by the investor sentiment report showing a 30% buy volume and 70% sell position. Money Flow Index flat at 75.46bps from the previous week’s 75.41 points, an indication that funds entered the market slightly.
NSEASI WEEKLY CHART MOVEMENT
Technically, the index action, on a weekly chart remained strong and bullish, as momentum indicators were mixed and strong on the activities of market forces. Just as the NGXASI trades above 46,000 points. The candlestick formation at the end of the week trading revealed a slowdown in the uptrend on above average traded volume in the midst of impressive corporate earnings and mixed sentiments.
The candlestick pattern indicates a possible reversal which depends on market forces in the new week that ushers in the month February. Meanwhile, the market recovery is still strong. Also, all eyes are 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.
Mixed Sectoral Indices
Performance indexes across the various sectors for the period were mixed, with the NGX Banking, Energy and Consumers Goods closing 4.84%, 3.53% and 2.04% higher respectively, while the NGX Industrial Goods led the decliners, after losing 5.12%, followed by the Insurance with 3.12%.
Activities in volume and value terms were down as investors exchanged 1.45bn shares worth N19.08bn, compared to previous week’s 1.86bn units valued at N47.49bn. Volume was driven by Financial Services ICT and Conglomerates, particularly GTCO, Courteville Business Solutions, Chams, Transcorp and FBNH.
Ecobank Transnational Incorporated and Academy Press were the best performing stocks for the week after gaining 44.75% and 42.42% respectively, closing at N13.10 and N0.94 per share respectively on positive earnings reports and market sentiment. On the flip side, C & I Leasing and University Press lost 10% and 9.86% respectively, at N3.78 and N2.65 per share, purely on selloffs and profit taking.
Outlook for the week
We expect increased volatility and positive momentum as players react to earnings released so far, in the midst of profit taking, bargain hunting, and income investors positioning for dividend, that just kicked off with MTNN corporate action of N8.57 final dividend ahead of February early filers like United Capital, NB, Zenith Bank, Africa Prudential, Nestle, Access Bank, Dangote Cement. On the strength of impressive numbers seen so far and expected payout ratio, 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 the Q4 numbers released, ahead of 2021 audited 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 high volume suggests that institutional investors are gradually returning to the market. It is important also that oil price continues to oscillate in the international market, trading above $87 per barrel; corporate actions, as well as the 2021 audited numbers that are around the corner.
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