Volatile Days, Mixed Outlook, Corrections Ahead, As NGXASI Returns 35.28% In January  

Market Roundup for January

Trading activities on the Nigerian Exchange for the month of January was bullish and volatile closing higher, despite profit taking and selloffs that hit the market in the last two trading sessions of the period. January sustained this positive trend and patterns for five consecutive years on the back of positive sentiments and impact of inflationary pressure on asset prices in the face of mixed corporate earnings inflow and increasing global and domestic headwinds.

During the period, the NGX benchmark index and market capitalization crossed the 100,000 psychological line and N50tr mark, to reveal a bull ascendancy as the Naira depreciation makes Nigerian stock cheaper, attracting inflow. This is just as returns on other investment windows yielded negative real rate of returns when considered against the hyperinflationary environment. This is made worse by the negative perception from 2023 policy change of the new government, the retention of the benchmark Monetary Policy Rate for more than six months. There are also the earnings expectations and other sundry  factors like institutional players holding their positions and the seeming gradual return of foreign investors that supported the rally and improved number of deals and volume.

The market had a strong bull-run as result of buying interest across the major sectors, the low, medium and large cap stocks, as well as accumulation of shares in Seplat, Dangote Cement,  Geregu Power, BUA Cement, MTNN, Airtel, Dangote Sugar, Nascon, Transcorp and other financial service stocks. These include blue chip companies and dividend paying stocks that had rallied to support the uptrend recorded in the first month of post-general election year, despite the market’s disconnection from economic reality.

We cannot overlook the effects of recent events, especially the upgrade of Nigeria’s economy by rating agencies, the disconnection of the benchmark rate at 18.75%, from other rates like NTB primary market auction rates in the short and long tenors. There was also the bearish and mixed outlook for fixed income instrument due to the rising inflation and unclear policy direction of the fiscal and monetary authorities. These factors helped January patterns repeat itself and extended the bull run for the fourth successive month.

At the end of January, the Nigerian equity market continued December’s positive outing, rallying to support the recovery noticed in the market since March 2020. This was despite the uptick in December inflation rate to 28.92% according to data from the National Bureau of Statistics (NBS).

Trading metrics and patterns on the Nigerian Exchange in January, the first month of the year, signaled a mixed trend with gaps being filled ahead of the release of more audited earnings reports, especially by early filers in February and an eventual portfolio reshuffling along sectors and companies’ performance. On Tuesday, the market received its first full-year 2023 audited result from Geregu Power. The numbers were good, especially the announcement of N8.00 dividend per share.

The positive responses to the better-than-expected numbers as of release dates and positioning in mispriced stocks by investors may support a rebound in the new month. This will confirm the inflow of funds into equities, and confidence in the market going into the year.

As noted earlier, the unaudited reports of various listed companies have given insights as to the real state of the economy and the companies in Q4. On the strength of the corporate numbers released so far, it is safe to guess what the Q4 GDP will look like when it is eventually published by the NBS.

The possibility of prices rallying further from here in this new month is mixed, amidst portfolio reshuffling on the strength of the Q4 and unaudited 2023 full year numbers. Investors can now target fairly priced stocks for high dividend yield when the audited full-year score-cards begin to flow into the market with the possibility of improved payout for service oriented companies with stronger numbers.

In the 22 trading sessions of January, the NGX All-Share index recorded 19 gains and three losses, resulting in 35.28% year-to-date gain, even as we note strong momentum state of the key performance index and some companies, their fundamentals, and the possibility of the seemingly high dividend yields attracting more inflows to the market as it pulls back. Worthy of note also is the fact that some equities are still grossly undervalued.

Meanwhile, the composite NGXASI gained a total of 26,380.69 basis points, closing at 101,154.46bps, after touching a high of 105.005.83bps from its low of 74,747.64bps for the month. The index opened at 74,773.77bps, on strong buying interests that impacted positively on the index and stock prices, pushing them further up to breakout various resistance levels and psychological lines within the period.

Total ‘buy’ volume for the month was 87% and 13% sell position, further extending the bull transition from last year, while volume index for the period was 2.45. Market capitalization rose by N14.44tr, closing at N55.36tr, from N40.92tr, representing a 35.29% appreciation in value, helped by capital appreciation in highly priced stocks.

Traded volume for the period was up significantly by 131.85%, at 19.29bn shares, as against 8.32bn units recorded in the preceding month, just as market breadth for the month was positive with advancers outnumbering decliners in the ratio of 79:30 to sustain the December bull position that resulted from factors mentioned above.


Bullish Sectorial Performance

The sectorial performance indexes were bullish, except for the NGX Banking and growth stocks indexes that closed in red,  as shown by the chart, the NGX Industrial goods, Consumer Goods,  Insurance, Oil/Gas and other indexes boosted the market during the month, while  Industrial goods index  outperformed the general market due to positive sentiment for cement manufacturing companies as Femi Otedola acquired some stake in Dangote Cement as share price was up by 138.5% which also influenced move in BUA Cement price for the period.

The NGX Banking and Growth indexes lost 3.37% and 2.76% respectively, driven by profit taking and selloffs in low cap stocks and banking stocks. The NGX’s Pension index that was supported by price appreciations in dividend paying stocks with high yield that recorded 12.94%; the NGX Premium index garnered 49.3%, to support the market performance during the period.  Others represented in the chart below reveal investors’ positive sentiment and the clear decision among traders, as the market’s Price-To-Earnings Ratio stayed below 20 times.

Best And Worst Performing Stocks For January

The best-performing stocks for the month under review were mix of low, medium and high caps across the sectors, led by Dangote Cement, which gained 138.51%, as a result of buying sentiment and position taking by high net worth investor. It was followed by BUA Cement and McNichols with 90.72% and 89.29% respectively. The Initiative Plc climbed 79.13% up, on market sentiment, while Wema Bank chalked 78.57%; among others.


Best Performing Stocks in January

Source: Investdata Research

On the other hand, the month’s worst performing stock was C & I Leasing which lost 33.16%, amidst selloffs and markdown for bonus shares; followed by Daarcomm which shed 25.56% due to selloffs and profit taking from its recent rally. Champion Breweries’s share price fell by a further 14.94%, showing an apparent lack of investor confidence in the company due FX losses across its industry, which made its numbers unimpressive. Tantalizer lost 10.64% of the year’s opening value, due to profit taking and selloffs as investors’ seek to reposition in dividend paying stocks with prospect of future growth in earnings that will drive share price and payout in 2024.

Worst Performing Stocks in January

Source: Investdata Research


Technical View

The NGX’s Index action for the month of January revealed an uptrend and a topping chart pattern after breaking out the bullish channel that supports trend continuation and reversal, as the index is set to breakdown another strong resistance level of 100,055.19bps and 96,212.98 ahead of the audited financial reports. At the same time, it is trading above T line and its 50-Day Moving Average on the monthly chart, with positive sentiments and improved traded volume.

The market is still trading within the long term bullish pattern, despite the pullbacks on profit taking and price correction, any moment from now as dividend season drew closer, depending on market forces, the market may rebound powerfully. The benchmark index momentum remained mixed and strong on a weekly and monthly time frame, reflecting an increased inflow of funds that pushed stock prices up in the first month of the year, extending the historical positive sentiment in January effect trend, while maintaining the pattern of uptrend during the month in recent years.

The trading patterns and momentum, going forward, are likely to improve or change, as investors react to the expected audited full-year earnings news, balance their portfolios and reposition. Early filers kicked off the season in February with dividend news announced earlier by Geregu with its corporate action of N8 each, even as market technicals for the month were positive, a situation expected to change in the new month.

Market Outlook

Volatility and oscillation are expected to continue in the new month, even as the outlook remains mixed due to likely price corrections, or pullbacks due to profit taking and portfolio reshuffling ahead of year-end and 2024 corporate actions and MPC meeting. The anticipated correction in the new month will, however, strengthen recovery despite the rise in inflation, insecurity and the global economic headwinds.

But investors at this point should not be greedy, but let their decisions be guided by their investment goals and exit strategies, even as the healthy inflow of funds into the equity assets after this pullback due to prevailing rates disconnection in money market is likely to continue till next NTB primary auction and outcome of the first MPC meeting of the new chairman, CBN Governor.

Again, the current pullbacks offer traders opportunities to position for the short term, while investors should target fundamentally sound, and dividend-paying stocks for possible dividend income and capital growth.

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Ambrose Omordion

CRO|Investdata Consulting Ltd





Tel: 08028164085, 08179547605