NGX Sustains Bull-Run, Positive Momentum, As Capitalisation Gains N4.3tr WTD

Market Update for the Week Ended January  26 and Outlook for Jan 29- Feb 2

It has been four straight weeks of positive outings on the Nigerian Exchange, as buying sentiments and momentum persisted amid the inflow of mixed unaudited corporate numbers, volalitly and profit taking which ensured it remains the world’s best performing stock market year-to-date.

This is despite the increasing macroeconomic headwinds, even as the nation’s remains disconnected from economic realities, with high hopes that the fiscal and monetary authorities would give a clear direction sooner than later through their cocktail of remedies by way of reforms and policies. The lingering foreign exchange market challenges and worsening insecurity across the country continue to fuel the hyper-inflationary environment that continue to impact asset prices, which in the process is creating wealth for discerning investors and smart traders.

It is noteworthy, however, that at the current market levels where stock prices are, they are not sustainable, having rallied on speculations and on the back of huge investor interests, rather than such fundamentals as strong earnings and economic performance. The market has entered its earnings season with a couple of scorecards released so far by Vitafoam, Univerity Press, LivingTrust Mortgage Bank, Japaul Gold, Royal Exchnage, Guinness Nigeria, Flour Mills Nigeria, Honeywell Flour and  FCMB Holdings. A look at the results revealed mixed performances due to the continued Naira depreciation which has caused massive problems for the economy, putting businesses under heavy strain except for those in the services sector like the financial institutions like banks, insurance companies, others financial services, transport and allied services like Nahco, Redstar, Skyway Aviation, Caverton among others.

The global markets also had a positive outing, boosted by impressive corporate earnings and better-than-expected macroeconomic data, GDP expansion, strong consumer spending, expected stimulus for China economy, ECB leaving rate unchanged and positive sentiment for Tech stocks across the matured markets, despite the profit taking witnessed in these markets. All eyes are on more economic data next week to guide investment decisions. They include GDP reports across Europe, Purchasing Managers’ Index data from China and policy meeting in US. The MSCI World index advanced  by 1.18% for the week under review, buoyed by factors  noted above.

Market players should hedge against a potential downturn, corrections and pullbacks by not being fooled by the current rally at the NGX as prices consistently hit new highs while pulling back on profit taking in the New Year. The  disconnection between market performance and economic realities is real, despite the benchmark All-Share index crossing 100,000 basis points psychological line, making another historic milestone at 102,401.88bps, even with the monetary and fiscal authorities  are yet to give a clear direction as to where they are headed with their policies actions and inactions.

Investors should, therefore, wake up and trade intelligently and smart to avoid being trapped in any position. While this is no joke, it is exciting and scary time on the Exchange at the moment. Now is the time for action, if you must protect your investment, or capital by taking profit and targeting defensive stocks that are stable and established with strong/compact shareholding structures, 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. This is to enable you know when to take position again, because oscillation, volatility, meltdown and pullbacks create buying opportunities. So, increase your positions when the markets pullback by buying more, if this inflationary pressure continues to boost stock prices.

With the market receiving more quarterly and unaudited 2023 full-year results from different quoted companies, during the week under review, the benchmark  NGXASI tested a new all-time high of 102,446.93bps. The growth is coming ahead of the dividend season and continues to support buying sentiments in the face of volatility, as investors and traders accumulate positions across major sectors of the market, especially in large cap companies.
The year 2024 started with high expectations, challenges and opportunities that are now creating wealth for discerning investors and smart traders. We believe that should government and monetary policies complement each other to put the economy in the path of recovery and progress, it will greatly support the current NGX growth performance.

The NGX index’s action has sustained an uptrend in the first month 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 meeting of the Central Bank of Nigeria Monetary Policy Committee (MPC), amid news of plans to replace the current external members in what could be a clean sweep of the etire membership. Recall that Michael Olayemi Cardoso replaced Godwin Emefiele, who was sacked in June last year, soon after which came a replacement of all four Deputy Governors. The apex bank recently released the MPC meeting calendar for the year, with the first slated for February.

To navigate the rest of Q1 market volatility and its mixed outlook profitably using fundamental and technical analyses 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  rebounded to a second weekly gain at $83.55 per barrel following sanctions on leaders of Houthi rebel groups and that strand Russia crude in the midst of  persistent tensions in Middle East and disruption in oil output. The  mixed global macroeconomic data as inflation resurfaced put pressure on oil prices. 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

Following the bullish week on the NGX, the benchmark index recorded five trading sessions of up markets, with increased buying interests in highly priced stocks and other dividend paying companies, irrespective of profit taking that hit the market in the first two trading days of the week. The positive momentum was  extended for the fourth successive week of positive outings in January on a high traded volume but negative market breadth in the face of  buying sentiment and profit booking in the financial stocks like banking and insurance.

The week’s trading opened on the northward direction, gaining 1.30% on Monday, and was sustained for the rest of the week’s trading sessions for the period, when the composite index chalked 2.97%, 3%, 0.57% and 0.25% on Tuesday, Wednesday, Thursday and Friday respectively. This followed position taking in  the shares of Dangote Cement, BUA Cement. Seplat, Geregu Power and others, bringing the week’s total gain to 8.32%, compared to the previous week’s 18.84% positive position.

Specifically, the composite NGXASI garnered 7,863.76bps closing at 102,401.88bps, compared to the week’s 94,538.12bps opening level, after breaking through many psychological lines to intra-week highs of 102,446.93bps and a low of 94,538.12bps. Market capitalisation also rose by to N56tr representing a 8.32% appreciation in value.

Top advancers’ table for the week  were dominated by  penny stocks, blue chip companuies and large cap stocks in the midst of buying sentiment in dividend paying stocks among others. Also notable was the fact that traders took 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.

Trade metrics  for the period was positive and mixed as losers outnumbered gainers in the ratio of 65:35 on buying sentiment as revealed by investdata sentiment report showing 99% ‘buy’ volume and 1% 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 time frame.

Technical View

The NGX’s bull-run and top chart pattern continued after breaking out the 100,000 psychological point and various mark of 101,000 and 102,000 to close the period at  102,401.90bps on a high traded volume that revealed accumulation of position by long-term market players in the face of high volatility and profit taking. Also, position trading by investors increasing their holdings is ongoing, while the market continues to trade above the T-line on a daily, weekly and monthly time frame, sustaining its uptrend in the midst of bearish divergent between money flow and  index action at overbought state of NGX. We note also that sellers are in control despite the market closing higher, as the index is trading above the 200-Day Moving Average on the weekly time frame.

Mixed Sectoral Indices

Sectorial indexes performance were mixed for the period, as NGX Insurance and  Banking closed 4.10% and 1.63% lower respectively, while NGX Industrial Goods led the advancers’ gaining 23.20%, followed by Energy and Consumer Goods with 11.57% and 5.29% respectively.

Activities  in volume and value were down, as players exchanged 2.98bn shares worth N57.87bn, compared to the previous week’s 5.18bn units valued at N77.8bn. Volume was driven by Financial Services, Conglomerates and Oil/Gas Industry. This was boosted specifically by trading in Transcorp,UBA, SterlingNG, Accesscorp and Japaul Gold.

The best performing stocks for the week were Tripple Gee and Dangote Cement after gaining 32.24% and 28.82% respectively, and closing at N2.83 and N694.10per share on market sentiments and position taking by Highnetworth investor. On the flip side, Veritas Kapital Assuarnce  and The Initiates lost 23.38%and 21.77% respectively, at N0.59 and N2.30 per share, purely on selloffs and profit taking.

Outlook for the week

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

However, retracement to the 94,559.46bps level and below is possible on profit taking as global and domestic events unfold.

Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08179547605