Positive Sentiment Still, Amidst Portfolio Rebalancing On Fixed Rates Divergence, Earnings Inflow
Market Update for January 30
The nation’s stock market rebounded on Monday, following the rekindled buying interest in blue chip companies, especially those with high dividend yields and strong growth prospects at a time all eyes are on expected corporate earnings and actions from early filers as January draws to a close. Also, sentiments continue to be positive and upbeat in the face of mixed interest rates and government bonds tumbling on last weekend’s downgrade of Nigeria by Moody’s following anxieties over the coming general elections, especially given the spate of violence across the country, as well as rising public debts, among others.
The NGX index’s action revered its previous loss position, breaking out sharply from the ranging or sideways mode movement with up bar on improved buying volume, despite the less than average traded volume of the market on a positive market breadth and sentiment. It broke out the strong resistance level of 52,752.96 and the psychological line of 53,000 on a positive sentiment and improve inflow of funds to 53,157.83 after testing 53,167.11bps, a situation that may likely continue for the market to test the 54,000 mark and even surpass the last peak of the market, depending on market forces and investor reactions to the release of year-end audited results and dividend announcement.
This is notwithstanding, the rate hike by the CBN, the disconnection in financial market instruments, as rates and yields decline in the fixed income space. This material change in rates and price behaviour may support the breakout witnessed at the end of Monday;s trading, even when technical indicators and candlestick formation are revealing bottom reversal and continuation patterns at once, so let waits for confirmation as trading opens today.
The positive sentiment and increasing buying interest across some major sectors of the market despite the seemingly low volume which may continue to support the rally as revealed in the short and medium-term trends which remain intact, but today’s trading will give a clear direction as more companies release their scorecards. This may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the coming 2023 general elections, and possible post-election rally, all things being equal.
Technically, the NGX index action just signaled a markup phase that need to follow through 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. Just as there is a convergence between the index action and MACD at the end of yesterday trading on dally chart that supports uptrend, due position taking in blue chip stocks. Let us keep our gaze on market forces and money flow.
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Oil price oscillation continued, pulling back to trade at $84.65 per barrel, on fear of OPEC increasing output in their coming meeting and recovery in China economy in the midst of rising attacked on Ukraine and fear of global recession. Just as the geopolitical tension, high interest rate and inflation across the globe continue to threaten the world. Also, supply tightened due to the Russia-Ukraine war that has lingered so far. The up and down movement of oil price also continues to drive volatility across markets.
Monday’s trading opened slightly in the upside and it was sustained throughout the session on demand for financials stocks, high cap shares and others, a situation that pushed the NGX’s index to an intraday high of 53.167.11 basis points from its low of 52,639.28bps, before closing above its opening figure at 53,157.83bps.
Market technicals were positive and strong, with higher volume of trade, compared to the previous session in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 98% buy position and 2% sell volume. The total transaction volume index stood at 0.85 points, just as momentum behind the day’s performance was relatively strong as Money Flow Index looked up at 63.94pts, from the previous day’s 54.42pts, indicating that funds entered the market.
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Index and Market Caps
Trading ended with the benchmark NGX All Share Index gaining a significant 499.95basis points, closing at 53,157.83bps, after opening at 52,657.88bps, representing a 0.95% growth, just as market capitalization rose by N272.31bn closing at N28.95tr from the previous day’s N28.68tr, which also represented a 0.95% appreciation in value.
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Meanwhile, the upturn was driven by position taking in the shares of Geregu Power, Airtel, Nahco, May/Baker, PZ, Cadbury, NGX Group, Fidelity Bank, Accesscorp, CHI Plc and International Energy among others, which impacted positively on Year-To-Date gain to 3.72%. Market capitalization YTD gain stood at N1.19 tr, representing 3.72% above its opening level for the year.
Bullish Sector Indices
Sectorial performance indexes for the session were in green, save for NGX Insurance that closed lower by 1.23%, while NGX Banking led the advancers after gaining 0.66%. followed by Consumer and Industrial goods with 0.24% and 0.08% respectively. Just as Energy closed flat.
Market breadth was positive as gainers outnumbered losers in the ratio of 27:15. whereas activities in volume and value were up, after investors exchanged 201.36m shares worth N5.67bn. Volume was driven by trades in Zenith Bank, GTCO, Transcorp, UBA and Geregu Power.
Geregu Power and JohnHolt were the best performing stocks, after gaining 10% each, closing at N176.00 and N1.21 per share respectively on market forces and earnings expectation. On the flip side, Wapic Insurance and Tripple Gee lost 8.89% and 8.57% respectively, closing at N0.41 and N0.96per share, purely on profit taking.
We expect positive sentiment to continue on position taking as portfolio rebalancing in the midst of divergence in fixed income rates and MPR adjustment to 17.5%, in the face of Q4 earnings expectations and election uncertainty. Any pullback at this point may 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.
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