NGXASI May Sustain Bullish Sentiment, As Investors Position Ahead of 2023 Audited Earnings, Jan. MPC Outcome

Market Update for January 2

Trading on the Nigerian stock market for the year 2024 began on Tuesday with gains extending the bullish and Santa Claus rally into the New Year, and ahead of the unaudited Q4 financials of listed companies, and the first Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting for the year. The meeting suffered many postponement especially in the second half of 2023, owing to the sack of the entire Board of Governors of the bank in the aftermath of a probe into the activities of the bank by a special investigator appointed by President Bola Tinubu.

Also, the outlook for 2024 remains mixed with stock prices expected to oscillates due to the changing global economic trend, geopolitical tensions, and fear of a recession, among others that continue to influence investment decisions, while driving volatility.  Also, the monetary policy of matured economies are likely to change if inflationary pressure in such environments continued as oil closed the year below $80 per barrel.

Equity prices on Tuesday closed higher on strong sentiments and momentum, reflecting the increased buying power among investors positioning for dividend income and capital gains that persisted especially while more companies notified the exchange of their board meetings and closed period for the 2023 full-year financials. In the last 10 years (2014-2023), historical data reveals that the month of January has closed red and green five times each. It is noteworthy that there have been four consecutive years of post-COVID 19 of positive close, despite the January effects.

Position taking across the major sectors of the market on Tuesday supported the recovery as revealed in the short, medium and long term trend, therefore, signaling the continuation of this uptrend in the month of January due to the expected full-year earnings and corporate actions that would support price, notwithstanding uncertainties associated with the increasing economic headwinds and unclear policy direction of the fiscal and monetary authorities.

The bull rampage supported the NGX All-Share index on Tuesday, as it broke out 75,000 psychological line heading to 76,000 mark at the end of first trading day of the year, while trading above the T-line and all the Moving Averages on the daily, weekly and monthly time frame in the midst of volatile and positive sentiments. This was driven by the continued bargain hunting activities of positioning in value stocks at their current prices ahead of the NGX’s historical peak of earnings reporting season that comes with more liquidity, buying interest, earnings surprises and disappointments. Also, rates and yields in the fixed income market have been on the decline across all tenor as seen in the last TB primary market auction offer for 2023 and OMO auction.

The NGX All-Share Index closed higher Tuesday on a very high traded volume and positive market breadth in the face of buying sentiment, even as the bull-run continued for the third successive session in the midst of positive market breadth and oscillating volume pattern with buying interests among the high, medium and low cap stocks continue in the face of high volatility. Therefore, investors should target companies with a consistent track record of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings that price feed on in any market cycle.

Technically, the NGX index action extended its markup phase in the face of a topping chart and bullish V-shape pattern that supports reversal or continuation of trend on a daily and weekly time frame, as the convergence between the index action and MACD at the end of Tuesday trading on a dally chart supports continuation of trend.  Despite profit taking that hit some banking stocks.  let us keep our gaze on market forces and money flow.

Tuesday’s momentum indicators appear to remain stronger, as the ADX read 51.24, just as, RSI and Money Flow Index are looking up to read 85.51 and 87.51 points against the previous session 78.95 and 79.28 points respectively. Volume trading pattern suggests the gradual return of many players who had been seating on the fence before now, including institutional investors holding cash to confirm the primary’s market direction, especially given the anticipated financial market and economic reset in 2024, that comes with huge opportunities to create wealth for smart investors and traders.

To navigate the rest of the quarter profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Monday, Wednesday and Friday 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 range market. Despite the oscillating volume of transaction witnessed in recent time, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

Oil price oscillation continued, as it traded at $75.74 per barrel in the midst of increasing US inventory, geopolitical tension and attacks on the red sea. Even as conflict in middle east is taking another dimension, while the war in Ukraine and Russia has escalated to influence the global economic outlook. The geopolitical tension across the globe is a major threat to many economies. Also, oil supply cuts by OPEC and others are not making impact as oil prices closed lower in 2023. This trend may likely continue in 2024, this up and down movement of oil price also continues to drive volatility.

Meanwhile, Tuesday’s trading opened in the upside and was sustained throughout the session on demand for stocks across the high, medium and low stocks, a situation that pushed the NGX’s index to an intraday high of 76,034.56 basis points from its lows of 74,747.64bps before closing significantly above its opening level at 75,990.88 bps.

Market technicals were positive and strong, with higher volume of trade compared to the previous session in the midst of positive breadth and buying sentiment as revealed by Investdata’s Sentiments Report showing 97% buy position and 3% sell volume. The total transaction volume index stood at 1.11 points, just as momentum behind the day’s performance was strong as Money Flow Index looking up at 87.51pts, from the previous day’s 79.28pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Tuesday’s trading, the composite NGX All-Share Index gained 1,217.03 basis points, closing at 75,990.88bps after opening at 74,773.77bps, representing a 1.63%, just as market capitalization rose by N665.97bn closing at N41.58tr from the previous day’s N40.92tr, which also represented a 1.63% appreciation in value.

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The session’s upturn was driven by demand for the shares of Airtel, BUA Cement, Transcorp, NB, PZ, UACN, UBA, Accesscorp, Dangote Sugar, Flourmill and Aiico, among others, which impacted positively on Year-To-Date gain of 1.63%. Market capitalization YTD gain stood at N665.90bn, representing 1.63% above its opening level for the year.

Bullish Sector Indices

All the sectorial performance indexes for the session closed in green, except for the NGX Banking that closed lower by 0.33%, while NGX Industrial goods led the advancers after gaining 2.14%, followed by Insurance, Consumer goods and Energy with 0.94%, 0.36% and 0.36% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 50:17; whereas activities in volume and value were mixed, after stockbrokers traded 515.81m shares worth N5.57bn. Volume was driven by trades in Mutual Benefits Assurance, Transcorp, Unity Bank, Jaiz Bank and UBA.

Aiico and Ikeja Hotel were the best performing stocks, gaining 10% each, closing at N0.88 and N6.60 per share respectively on market forces and expectation of earnngs.  On the flip side, Cadbury and Thomas Watts lost 10% each, closing at N17.10 and N2.43per share, purely on profit taking and selloffs.

Market Outlook

We expect positive sentiment and trend to continue after breaking out 75,000 psychological line heading to 76,000 mark on positioning by bargain hunters ahead of unaudited Q4 2023 numbers and volatility in the face of coming MPC meeting, as pullback at this point  will add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605

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