Positive Sentiments Yet, As Investors Eye Sound Stocks, Earnings Season Beckons

Market Update for the Week Ended January 5 and Outlook for January 8-12

The bullish first trading week of a new year 2024 on the Nigerian Exchange, as the benchmark All-Share Index posted consistent gains throughout on stronger buying interest and positive momentum. This sustained the bull-run for the eleventh successive week, breaking out the upper trend line of the bullish channel that started since April 2020, with stocks making new highs. This is not unexpected going by funds inflow into the market on the impact of the sustained Naira depreciation, attractive return on the NGX in the midst of rising inflation that threw other investment windows into negative returns. There is also the strong Q3 earnings and expected higher dividends payout ahead of the earnings reporting season that will kick-off any moment from now with unaudited Q4 financials.

The benchmark NGX All-Share index hit another new all-time high during the week under review, with the highest weekly gain since the week ended 25 November 2022 that reflects appreciation by highly priced and blue-chip stocks. Such was especially the case with financial services providers that became the toast of the investing public, even as the fixed-income market outlook remains mixed, thereby losing the safe haven status considering the inflationary environment of today.

The New Year portfolio rebalancing and bargain hunting ahead of dividend season supported buying sentiments in the face of volatility as investors and traders accumulates positions across the major sectors of the market. These pushed the index’s action to a historic all-time high, with the NGXASI closed above the 79,000 psychological lines, heading to 80,000 mark the midst of extended Santa Claus rally,  and the earnings season. Added to this is the prevailing disconnection of the market from the nation’s economic realities as revealed by emerging weak macroeconomic data. The year 2024 started with high expectations, challenges and opportunities to create wealth for discerning investors and smart traders, if government policies complement each other to put the economy in the path of recovery and progress.

The recent Purchasing Manager Index report from Stanbic IBTC revealed an expansion of business activities in the month of December in the midst of rising prices and festivity period. PMI for the month stood at 52.7 points, compared to 48 points in November. Meanwhile, all eyes are on the first inflation report in 2024 and ahead of the first Monetary Policy Committee meeting of the new Central Bank of Nigeria (CBN) Governor and four deputy governors to give the nation’s economy direction.

There are material shifts in the NGX index’s action since it broke out 65,652.38 basis points in 2008 to make a new all-time high, due to the ongoing portfolio repositioning as investors hedge against inflation and market downturn on the strength of the impressive corporate earnings.

Others include the outstanding numbers of share, shareholding structure and dividend history, which impacted stock prices across board, while also reflecting on the very high volume of transactions and positive market breathe for the week. All attention has now moved to the policy agenda of the fiscal and monetary authorities with high hopes that they would fix the economy or put it on recovery path quickly. The disconnection of the market and economy continues to linger in the face of market volatility and weak economic activities.

To navigate the rest of Q1 market volatility and its mixed outlook profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Mondays, Wednesdays and Fridays, 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 breakout of bullish channel to continue the markup phase. As volume of transaction witnessed within the week remain high traded volume, it is time to go shopping for undervalued stocks, sectors and the next insider dealing opportunity.

Oil price during the week under review oscillated to rebound marginally as it trades at $78.76 per barrel in the midst of red sea attack and traders projecting oil price above $80 in 2024, as middle east conflict takes another dimension in the face of mixed global macroeconomic data as inflation resurfaced. As oil demand outlook remains mixed, despite the signal of rate cut in 2024. We note also the rising geopolitical tensions across the globe and supply disruptions longer, due to the Russia-Ukraine war that has lingered for more than a year, and is indeed escalating. The up and down movement of oil prices also continues to drive volatility across different investment windows.

Movement Of NGXASI

The NGX witnessed another bullish week of four trading sessions of up markets after New Year’s holiday, as the NGXASI closed higher to extend the positive momentum and outing for eleventh consecutive weeks on a Hugh traded volume and buying sentiment. Even as the financial sector outperformed the market and other major sectors in the first trading week of 2024.

Trading activities for the week started on a positive note, extending the previous session’s gain by 1.63%. This was sustained at midweek, Thursday and Friday moving northward with 2.04%, 0.67% and 2.11% respectively on positioning in banking, insurance stocks and other large cap companies.  This brought the week’s total gain to 6.54%, compared to the previous week’s 1.01% positive position.

Cumulatively, the NGXASI gained 4,890.89 basis points, closing at 79,664.66bps, compared to the week’s 74,773.77 bps opening level, after touching an intra-week high of 79,696.01bps and a low of 74,747.64bps. Market capitalisation also rose by N2.7tr to N43.6tr representing a 6.54% value gain.

The top advancers’ table for the week was dominated by low priced and medium cap stocks amid the buying sentiment in blue chip companies in the face of high volatility. Also notable is the fact that investors are taking advantage of the price oscillation and low valuation, despite stock prices hitting new highs to buy into value and dividend paying companies.

Market technicals for the period was positive and strong as gainers outnumbered losers in the ratio of 88:17 on buying sentiments as revealed by investdata sentiment report showing 99% ‘buy’ volume and 1% sell position. Money Flow Index was looking up to record the highest money entrance into equity at  100bps from the previous week’s 95.38 points, an indication that funds hit the market on a weekly timeframe.


Technical View

The NGX index’s action during the period broke out 74,773.85 to cross 79,000 psychological point for the first time ever in the history of the market  to test 79,696.01bps on the weekly chart and very high  traded volume for the period, signaling accumulation of position by  smart money in the face of  high volatility and profit taking, while position trading is ongoing by investors increasing their holdings, as the market trades above the T line on a daily, weekly and monthly time frame to sustained its uptrend in the midst of positive sentiment and buying interest. We note also that the index is trading above the 200-day moving average on the weekly time frame.

Bullish Sectoral Indices

The sectorial performance indexes closed green, led by NGX Insurance index after gaining 14.05%, followed by Banking, Consumer goods, Industrial goods and Energy with 10.52%, 4.40%, 3.58% and 3% respectively.

Transactions in volume and value were up, as players exchanged 3.32bn shares worth N41.76bn, compared to the previous week’s 1.19bn units valued at N31.43bn. Volume was driven by Financial Services, Conglomerates and Energy Industry. The was boosted specifically by trading in Fidelity Bank, FCMB. SterlingNG, Accesscorp and Transcorp.

Transcorp and Ikeja Hotel were the best performing stocks for the week, gaining 46.19% and 46.17% respectively, and closing at N12.66 and N8.77 per share on market sentiments and forces. On the flip side, C & I Leasing and SCOA lost 39.64%and 1.63% respectively, at N3.38 and N1.63 per share, purely on price adjustment for bonus shares and selloffs.

Outlook for the week

We expect positive sentiment and profit taking to continue, as market players target fundamentally sound stocks ahead of earnings reporting season in the face of depreciating naira that made NGX stocks cheaper and rising inflation. Also, the market awaits the steps government would take to resolve the county’s lingering FX challenges.

However, retracement to the 74,559.46bps level and below is possible on profit taking as global and domestic events unfold.

Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605