Positive Sentiment May Continue, Rising Inflation Pulls More Investors To Equities’ Space Ahead Of Earnings Inflow

Market Update for January   15

Again, trading on the Nigerian Exchange started the third week of the year on a strong bullish note following increased buying interests across the low, medium and large cap stocks as earnings reporting season draw closer. in the midst of trading, the National Bureau of Statistics released the December  inflation data hit a three-decade high at 28.92% from 28.22% in November, due to the rising food prices due to insecurity that drove farmers away from their farmlands, imported inflation, rising cost of transportation and energy which pushed cost of production up. Added to these is the prevailing naira depreciation on daily basis, as hyperinflation environment persisted. We expect that the January 2024 Consumer Price Index would further rise on the back of elevated increases in energy prices, lingering insecurity challenges in the major food producing states and others.

This will continue to threaten the fixed income market returns that is deepen in negative real returns, as the latest TB primary market auction rates decline further in all the tenors and OMO auction on Monday remain unchanged with 365 days at 17.75%. on this note, equity space remains a better option, after NGX had recorded year to date gain of 13.2% in less than 15 trading sessions, as more funds flow into stocks with impressive earnings that will support higher dividend payout. Also, all eyes are still on the fiscal and monetary authorities that are yet to give a clear direction of where the economy is heading, as happening in the global economy, especially the sustained geopolitical tensions in the Middle East and Eastern Europe, and the fear of a recession, among others that will continue to influence investment decisions, while driving volatility.

The NGX index’s action remains above the T-line, as it makes another new historic milestone of breaking out strong resistance level of 83,240.25 point to cross the 84,000 psychological line in the midst of high volatility and positive momentum to trade above the short and long term Moving Averages on the daily, weekly and monthly time frame. Portfolio rebalancing on the exchange continued as earnings and the dividend season draws closer with unaudited Q4 results hitting the market any moment from now, just as more companies like PZ, Transcorp, Transcorp Hotel, GSK and others notified the NGX and investors of their board meetings and closed period for the 2023 full-year financials. There is also the January effects and other factors associated with the increasing economic headwinds

The candlestick formation at the end of the trading session revealed the beginning of markup phase and likely continuation of uptrend that needs confirmation as trading opens this morning. Therefore, market players should target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings which price feeds on in any market cycle. Technically, the index’s action has remained on overbought, which is also a topping chart pattern.

The strength behind the trend or the session were revealed by momentum indicators, despite the overbought state of the market, as the ADX read 67.29, while RSI and Money Flow Index are looking up to 87.31 and 81.72 points against the previous session 85.24 and 81.48 points respectively. This should be a concern for investors and smart traders as they trade caution. The trading volume pattern suggests hold and watch disposition of market players and full return of many players who had gone on holidays and institutional investors accumulating more positions as others investment windows returns remain below inflation and negative.  Also, the anticipated financial market and economic reset in 2024, comes with huge opportunities to create wealth for smart investors and traders.

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Oil price pulled back on Monday, as its oscillation continue to trade at $77.64 per barrel in the midst of supply disruption and profit taking by oil traders, as fundamentals point to flat oil prices in 2024 in the face of rising tensions as middle east conflicts escalating, 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 increase by OPEC and others impact oil price as it continued trade below $80. This trend may likely continue in 2024, this up and down movement of oil price also continues to drive volatility.

Meanwhile, Monday’s trading opened on the upside and its was sustained throughout the session, on buying interest in financial stocks and others, a situation that pushed the NGX’s index to an intraday high of 84,640.89 basis points from its lows of 82,949.40bps before closing above its opening level at 84,640.89 bps.

Market technicals were positive and strong, as volume of trade was higher compared to the previous session in the midst of breadth favoring the bulls on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 1.29points, just as impetus behind the day’s performance was strong as Money Flow Index looking up at 81.72pts, from the previous day’s 81.48pts, indicating that funds entered the market.

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Index and Market Caps

The benchmark NGX All-Share Index at the end of Monday’s trading  gained 1,597.93bps, closing at 84,640.89bps after opening at 83,042.96bps, representing a 1.92% growth, just as market capitalization rose  by N874.42billion closing at N46.32tr from the previous day’s N45.44tr, which also represented a 1.92%  appreciation in value.

Attention: If you have not signed up for INVESTDATA’s buy and sell signal setup, don’t delay, because the number of stocks entering their overbought range has just increased to 54 as they rallied to new highs that call for caution and positive chart patterns to be on our watchlist. These stocks have potentials to retrace, considering their earnings prospects and the oscillating moves in an upmarket and weak economy.

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Monday’s upturn was driven by position taking and accumulation in the shares of Geregu, PZ, Cadbury, Dangote Sugar, Transcorp, Dangote Cement, BUA Cement, GTCO, Zenith Bank, UBA, ETI, Accescorp, and UACN, among others, which impacted positively on Year-To-Date gain of 13.20%. Market capitalization YTD gain stood at N5.84 trillion, representing 13.20% above its opening level for the year.

Bullish Sector Indices

All sectorial performance indexes for the session were in green, led by NGX Insurance index after gaining 7.23%, followed by Industrial goods, Consumer, Banking and Energy with 4.40%, 1.78%, 1.30% and 0.08% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 66:8, whereas activities in volume and value were up, after players exchanged 807.5illion shares worth N11.03bn. Volume was driven by trades in Transcorp, Aiico, Wema Bank, Jaiz Bank and FCMB.

Chams and Mansard were the best performing stocks, gaining 10% each, closing at N2.53 and N6.49per share respectively on market forces and expectation of earnings.  On the flip side, Abbey Building and Julius Berger lost 9.5% and 3.5% respectively, closing at N2.47 and N54.50per share, purely on profit taking.

Market Outlook

We expect positive sentiment and momentum  to continue, as  market players digest December CPI of 28.92% and ongoing portfolio persist ahead of unaudited Q4 2023 numbers and volatility in the face of  expected December CPI and 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




Tel: 08028164085, 08179547605