Uptrend May Linger On NGX, As Speculators Buy Into BUA Foods, Reposition Portfolios

Market Update for January 6

The bull transition on the Nigerian Exchange persisted on Thursday, as the key performance NGX All-Share Index closed higher on a lower traded volume, but amidst positive market breadth and strong buying pressure as indicated by investors’ vibes a 100% buy position at the end of trading.

Despite, the seeming profit taking across the sectoral indexes, the buying interests in banking stocks ahead of 2021 financial reports, pushed the market up to sustain the bullish momentum, especially against the backdrop of this sector being the most consistent in dividend payment.

It is equally the most active in trading volume that supports short and long term investment objectives in any market cycle.

With investors and analysts expecting unaudited Q4 results to start hitting the market any moment from next week, they are also likely to start positioning in companies with high dividend yields and prospect of growing their earnings power in the future, and are thereby able to support their price and ensure higher payouts.

These, also will support the speculative moves in the market as more players return from their yuletide holidays, and the Q4 unaudited numbers give insight as regard the positions of various companies, and their dividend payment capacity on the strength of the expected numbers.
Trading metrics for the session show investors’ buying interests in BUA Foods, Academy press, Lafarge Africa, and financial sector stocks. We note also, foreign players interest in Airtel Africa and Seplat Energy that remain high, while local investors are concentrate on dividend paying stocks that are undervalued, but have high upside potentials, like Access Bank, Zenith Bank, United Capital, Lafarge, UBA, Union Bank of Nigeria, FidsonbHealthcare, GSK, May/Baker and others.

Technically, the NGX index’s action broke out its recent resistance of 43,548.28 on a light volume, while recovery and bull transition continued as revealed by the candlestick at the end of Thursday’s trading, with investor sentiments looking up.

The benchmark index closed the session above its 20 and 50-Day Moving Average. Momentum indicators for the day were positive and mixed, just as the ADX is reading 23.22, RSI above 50 at 67.17 and Money Flow Index slight down at 61.22 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds into the equity space as fixed income market yields direction remains unclear and flat. 
Thursday’s trading opened slightly in the upside before pulling back at midday, and then rebounded throughout the session on buying interests in high, medium and low cap stocks, which pushed the NGX index to an intraday high of 43,607.94 basis points, from its lows of 43,145.77bps. Thereafter, the index closed above its opening point at 43,607.94bps.

Market technicals were positive and mixed, with volume traded lower than the previous day’s in the midst of positive breadth and buying sentiment as revealed by Investdata’s Sentiment Report showing 100% buy volume. The total transaction volume index stood at 0.53 points, just as the impetus behind the day’s performance remained relatively strong. Money Flow Index slipped at 61.22 points, from the previous day’s 62.00points.  

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Index and Mkt Cap Movement 
The benchmark index, at the end of Thursday’s trading, gained 131.19 basis points, at 43,607.94bps after opening at 43,476.75bps, representing a 0.30%up, just as market capitalization rose by N70.69bn to N23.50tr, from the opening value of N23.43tr, also representing 0.30% value gain.

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This session’s upturn was driven by buy interests in BUA Foods, UACN, UBN, Livestock Feeds, Lafarge, Ucap, NGX Group, Access Bank, FBNH, Zenith Bank and UBA, among others. This impacted positively on the Year-To-Date gain, raising it to 2.09%. Market capitalization growth stood at N1.53tr YTD, representing a 5.08% from the opening level for the year.
Bearish Sector Indices 
Performance indexes across the sectors were down, except ffo the NGX Banking index that closed 0.44% higher, while the NGX Insurance index led the decliners, after losing 1.35%, followed by Energy, Industrial and Consumer Goods with 0.90%, 0.39% and 0.12% respectively.
Market breadth was positive as advancers outnumbered decliners in the ratio of 24:13, while activities in volume and value terms were significantly down as investors exchanged 174.61m shares worth N2.13bn, compared to the previous day’s 1.24bn units valued at N42.97bn. Volume was driven by trades in FBNH, UBA, Transcorp, BUA Foods and Zenith Bank.  
BUA Foods and Academy Press were the best-performing stocks after gaining 10% and 9,09% respectively, closing at N48.40 and N0.60 per share respectively as positive
sentiments for the newly listed food company. On the flip side, Sunu Assurance and NEM at 9.76% and 7.78%, closing at N0.37 and N4.15 per share, purely on selloffs.

Market Outlook
We expect uptrend to continue on speculative buying into the newly listed food company and repositioning in dividend paying stocks ahead of 2021 Q4 and full year unaudited earnings reports that may start hitting the market any moment from next week.

Already, two companies made their corporate actions available to the market, announcing a growth in their dividend payout to reflect the numbers posted.  Also, inflow into equity space is looking up slowly on changing investment decision to keep this trend ahead of new year holiday.  As market players digest economic data and happenings in fixed income market after the NGX index action retraced to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and seasonality likely to influence stock prices ahead of year-end window dressing.

The relatively low volume traded in the midst of retracement is creating new buy opportunities on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the session revealed that institutional players are not buying yet.  It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position.  Even as many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield capable of serving as a hedge against inflation

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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605