Market Update for the Week Ended December 22 and Outlook for Dec 25-29

The bull-run continued for the ninth consecutive week on the Nigerian Exchange, sustaining the bullish channel which began in April 2020, as stocks and NGX indices made new highs on the strength of strong earnings, improved dividends payout, rising inflation and Naira depreciation against major currencies of the world. The composite NGX All-Share index is hitting new all-time highs, while the faixed-income market outlook remains mixed, thereby losing the safe haven status  considering the inflationary environment of today. The dwindling purchasing power and weakening economy amid increasing headwinds rounds up the volatile year in a positive light.

The increased buying interest among market players especially in financial services, blue chip companies and highly priced equities pushed the NGXASI to historic all-time high, as it closed above the 74,000 psychological lines in the midst of ongoing seasonality. There was also the impact of portfolio rebalancing and the prevailing disconnection of the market from the nation’s economic realities as revealed by the weak macroeconomic data that is set to usher in 2024 amidst great expectations, challenges and opportunities to create wealth for discerning investors and smart traders.

The recent workforce report from the National Bureau of Statistics (NBS) and the CBN external reserve position as shown in the end of Q3 CBN Economic Report looks good based on the figures released. We must however add that despite the absence of credible data to prove it, the labour report released by the statistics bureau doe not reflect the reality on ground today. The data, for example, revealed that unemployment rate in Nigerian rose marginally to 4.2% in Q2 from 4.1% position in first quarter 2023, based on new methodology recently adopted is still not clear.

It is noteworthy too that Nigeria’s external position improved for the second consecutive quarter with the current account posting a $3.3bn (4.0% of GDP) surplus in Q3:2023 compared to the $810.0m (0.8% of GDP) in Q2. This surplus was attributed to the increase in export earnings and lower import bills. Specifically, export earnings increased 7.0% q/q to $13.7bn on account of increased oil revenue (oil price and production up 12.2% and 5.3% respectively) while import bills fell 16.7% q/q to $10.5bn due to lower importation of oil and non-oil products

As the year gradually draws to a close, market players should take advantage of the ongoing seasonality and portfolio rebalancing to take profit and position in dividend paying companies and defensive stocks as NGX rally in a markup phase of the market ahead of 2024 earnings reporting and dividend season, so join us at Q1 Master Class to Secure your Financial Future in 2024 through Investdata Master Classes With Ambrose Omordion.

There are material shifts in the NGX index’s action as it makes a new all-time high, due to the ongoing portfolio rebalancing 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 ahead of year-end Santa Claus rally and window dressing. These impacted stock prices across the board, while also reflecting on the 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.

The NGX remains above the T-line and 74,000 marks on a daily, weekly and monthly charts, as its breakout 73,000 and 74,000 psychological lines amid buying interests and strong momentum in the midst of above average traded volume. This confirms markup phase of the market even when it pulled back on Friday as a result of profit taking. The high volume of transaction indicates a bullish sign and smart money effort to push prices higher. These, notwithstanding, we urge market players to watch and confirm trend in the last three trading sessions of 2023, with bargain hunters already taking advantage of the profit taking, relatively fair valuation and in the face of buying interest and pullback to accumulate position.

To navigate the rest of the year market volatility and its mixed outlook profitably using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “and 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 consolidation. As volume of transaction witnessed within the week remain above the average 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 slide down marginally as it trades at $79.07per barrel in the midst of US production surpassing 2019 records and steady prices before the holiday, despite the red sea attack and Angola quitting OPEC, even as middle east conflict takes another dimension and mixed global macroeconomic data. As oil demand outlook remains mixed, despite the seeming cooling inflation and 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 market had another bullish week of four trading sessions of up markets and one down market of profit booking, as the benchmark NGX All-Share index closed higher to extend the positive momentum and outing for ninth successive weeks on a high traded volume and buying sentiment. Even as the banking sector outperformed the market and other major sectors, despite the seeming profit taking witnessed on the last trading session of the week.

The week trading activities opened in the green, halting the previous session loss with marginal gain of 0.02%, which was sustained on Tuesday, midweek and Thursday moving northward  with 0.09%, 1.28% and 1.21% respectively on positioning in banking stocks and others for dividend, before pulling back on Friday by 0.36%, following profit booking. This brought the week’s total gain to 2.26%, compared to the previous week’s 1.18% positive position.

Consequently, the NGXASI gained 1,634.04 basis points, closing at 74,023.27bps, compared to the week’s 72,389.23bps opening level, after touching an intra-week high of 74,430.47bps and a low of 72,276.75bps. Market capitalisation also rose by N894.1 billion to N40.5 trillion representing a 2.26% value gain.

The week’s top advancers’ table 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 to buy into value and dividend paying companies.

Trade metrics for the period was positive and strong as gainers outpaced losers in the ratio of 55:35 on buying sentiments as revealed by investdata sentiment report showing 81% ‘buy’ volume and 19% sell position. Money Flow Index was looking up  to record the highest  money entrance into equity  at 95.77bps from the previous week’s 86.46 points, an indication that funds hit the market on a weekly timeframe.

Technical View

 NGX index’s action during the period  broke out 73,000 mark to cross 74,000 psychological point for the first time ever in the history of the market  to test 74,430.47bps on the weekly chart and on above average  traded volume on a weekly chart 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 momentum. 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 were in the green, except for NGX Consumer goods that closed 0.7% lower, while the NGX Banking led the advancers’ after gaining 3.35%, followed by Insurance, Industrial goods and Energy with 1.70%, 0.33% and 0.09% respectively.

Activities in volume and value were up, as players exchanged 2.47bn shares worth N53.79bn, compared to the previous week’s 1.88bn units valued at N31.63bn. Volume was driven by Financial Services, Conglomerates and Services Industry. The was boosted specifically by trading in Abbey Building Mortgage, Transcorp, Accesscorp, GTCO and Nahco.

Infinity Trust Mortgage Bank and Daar Communication were the best performing stocks for the week, gaining 60.64% and 50% respectively, and closing at N4.53 and N0.69 per share on market sentiments and forces. On the flip side, ABC Transport and Omatek lost 16.48%and 12.33% respectively, at N0.76 and N0.64 per share, purely on profit taking and selloffs.

Outlook for the week

We expect positive sentiment and profit taking to continue on year end portfolio rebalancing and window dressing  ahead of 2024 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, even as Moody’s upgraded Nigeria’s outlook to positive from stable.

However, retracement to the 68,559.46bps level and below is possible on profit taking as global and domestic events unfold.

Take Action

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Sub-Topic

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4. 4.Market Timing & Positioning: Using Numbers/Dates

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Date: January 1, 2024

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Venue: Zoom

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605