Market Update for January 3
Nigeria’s equity market began 2023 on Tuesday with gains extending the bullish and Santa Claus rally into the New Year, and ahead of unaudited Q4 financials, and the first Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting for the year.
Also, the outlook for 2023 remains mixed 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.
Equity prices on Tuesday closed higher on strong sentiments and momentum, reflecting the increasing buying power among investors positioning for dividend income and capital gains that persisted especially as more companies notified the exchange of their board meetings and closed period for the 2022 full-year financials.
In the last 10 years, historical data reveals that the month of January has closed red and green five times each, 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 recovery in the month of January due to the expected full-year earnings and corporate actions that would support price, notwithstanding uncertainties associated with the coming 2023 general elections, and a possible post-election rally, all things being equal.
The bull rampage supported the NGX All-Share index on Tuesday, as it traded above the 200-Day Moving Average on the daily and weekly time frame in the midst of volatile but 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 2022.
The NGX All-Share Index closed higher again Tuesday, on an above average traded volume and positive market breadth in the face of buying pressure, even as the bull-run continued for the 12th 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 energy stocks. let us keep our gaze on market forces and money flow.
Tuesday’s momentum indicators appear to remain stronger, as the ADX read 61.82, just as, RSI and Money Flow Index are looking up to read 90.39 and 100 points against the previous session 89.44 and 100 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 2023, that comes with huge opportunities to create wealth for smart investors and traders.
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Oil price oscillation continued, as it traded at $81.73 per barrel on increasing conflict in Ukraine in the midst of rising cases of Covid-19 in China and its reopening. Just as the geopolitical tension and fear of recession as a result of high interest rate and inflation across the globe. 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.
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 51,595.66 basis points from its lows of 51,241.36bps before closing above its opening level at 51,595.66bps.
Market technicals were positive and strong, with lower 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 100% buy position and 0% sell volume. The total transaction volume index stood at 0.65 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 100pts, from the previous day’s 100pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Tuesday’s trading, the NGXASI gained 335.15 basis points, closing at 51,595.66bps after opening at 51,251.06bps, representing a 0.67%, just as market capitalization rose by N187.70bn closing at N28.10tr from the previous day’s N27.92tr, which also represented a 0.67% appreciation in value.
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The session’s upturn was driven by demand for the shares of BUA Foods, UBA, Fidson, Nahco, Aiico, UBN and Conciliated Hallmark Insurance, among others, which impacted positively on Year-To-Date gain of 0.67%. Market capitalization YTD gain stood at N187.7bn, representing 0.67% 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 Energy that closed marginally down by 0.02% while NGX Consumer goods led the advancers after gaining 3.60%, followed by Banking and Insurance with 2.66% and 2.55% respectively. Just as NGX Industrial goods closed flat.
Market breadth was positive as gainers outnumbered losers in the ratio of 23:10; whereas activities in volume and value were down, after stockbrokers traded 321.67m shares worth N4.35bn. Volume was driven by trades in FBNH, GTCO, Aiico, UBA and Accesscorp.
BUA Foods and John Holt were the best performing stocks, after gaining 10% and 9.59%, closing at N71.50 and N0.80 per share respectively on market forces. On the flip side, Computer Warehouse Group and FCMB lost 8.91% and 8.83% respectively, closing at N0.92 and N3.51per share, purely on profit taking.
We expect positive sentiment and trend to continue after breaking out 51,000 psychological line heading to 52,000 mark on positioning by bargain hunters ahead of January effects and volatility in the face of election uncertainty, as pullback at this point 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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