Positive Sentiment Yet, As NGXASI Heads For 78,000bps, Investors Bet On 2023 Full-Year Earnings

Market Update for January  3

The bullish nature of Nigeria’s stock market got more fire at the midweek, following increased buying interests across the major sectors of the market on a strong inflow of funds and positive momentum that sustained the uptrend for a fourth straight session. This is coming ahead of the unaudited Q4 financials of listed companies, and the policy meeting of the Central Bank of Nigeria (CBN) in this first month of 2024.

The outlook for 2024, nonetheless, 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.

Prices of low, medium and large cap stocks are making new highs, thereby pushing the NGX indexes higher on a huge traded volume and strong positive market breadth to start the new year on a positive note, reflecting the bargain hunting and portfolio rebalancing for dividend season and income. More companies are notifying the exchange of their board meetings and closed period for the 2023 full-year financials, in the midst of January effects and other factors associated with the increasing economic headwinds. This even as the policy direction of the fiscal and monetary authorities remains unclear, and in spite of the seeming expansion in business activities in December, reflecting activities of the ongoing festive period. The PMI hit a six-month high at 52.7 points from 48 points in the month of November, a situation likely to impact corporate earnings.

The bull rampage supported the NGX All-Share index at the end of midweek trading, breaking out the 76,000 and 77,000 psychological lines to trade 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 Index closed significantly higher, forming a double shoulders’ pattern that support a continuation of trend as smart money makes effort to move prices higher on a very high traded volume that needs confirmation as trading opens Thursday. 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, index action had 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 on a dally chart supports continuation of trend.  Just as profit taking is underway as traders cash out their recent gains from the Santa Claus rally.

Momentum indicators appear to remain stronger, as the ADX read 53.19, just as, RSI and Money Flow Index are looking up to read 87.27 and 88.65 points against the previous session 85.51 and 87.51 points respectively. Volume trading pattern suggests the return of many players who had gone on holidays and institutional investors accumulating more positions as others investment windows returns remain below inflation.  As 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 oscillation continued, as it rebounded to trade at $78.84 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.

Midweek’s trading started in the green and was sustained for the rest of the session on demand and accumulation of position in all classes of stocks, a situation that pushed the NGX’s index to an intraday high of 77,548.01 basis points from its lows of 75,990.16bps before closing significantly above its opening level at 77,537.57 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 pressure as revealed by Investdata’s Sentiments Report showing 99% buy position and 1% sell volume. The total transaction volume index stood at 1.94 points, just as momentum behind the day’s performance was strong as Money Flow Index looking up at 88.65pts, from the previous day’s 87.51pts, indicating that funds entered the market.

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Index and Market Caps

The benchmark NGXASI, at the end of the day trading gained 1,546.69 basis points, closing at 75,990.88bps after opening at 75,990.88bps, representing a 2.04%, just as market capitalization rose by N846.40bn closing at N42.43tr from the previous day’s N41.58tr, which also represented a 2.04% value gain.

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The upturn was driven by demand for the shares of Lafarge Africa, BUA Foods, Transcorp, NB, ETI, UACN, UBA, Accesscorp, Dangote Sugar, Nascon and Oando, among others. This impacted positively, as Year-To-Date gain jumped to 3.79%, while market capitalization YTD soared by N1.51tr, representing 3.70% above its opening level for the year.

Bullish Sector Indices

All the sectorial performance indexes closed higher, as NGX Banking index led the advancers after gaining 6.66%, followed by Insurance, Consumer goods, Energy and Industrial goods with 5.50%, 2.42%, 1.89% and 0.31% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 78:7; whereas transactions in volume and value were up, after stockbrokers traded 927.56m shares worth N10.69bn. Volume was driven by trades in Fidelity Bank, FCMB, UBA, Universal Insurance and Accesscorp.

Dangote Sugar and FCMB were the best performing stocks, gaining 10% each, closing at N63.25 and N8.25 per share respectively on market forces and expectation of earnings.  On the flip side, Learn Africa and Champion lost 9.09% and 7.32% respectively, closing at N2.90 and N3.80per share, purely on profit taking and selloffs.

Market Outlook

We expect positive sentiment and trend to continue after breaking out 77,000 psychological line heading to 78,000 mark on positioning by bargain hunters ahead of unaudited Q4 2023 numbers and volatility in the face of the coming MPC meeting. A pullback at this point will add more strength to upside potential, following which 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