Trading activities on the Nigerian Exchange (NGX) in the month of January was mix but closed in positive direction at the end of the month In this report AMAKA IFEAKANDU writes on the factors that contributed to the performance of the market.
The nation’s equity market witnessed bullish run and volatility in the month of January this year but closed higher sustaining growth patterns on the back of impressive corporate earnings flow for 2022 financial year.
The trading activities during the month showed that the market capitalisation crossed N28 trillion mark.
The market also had a strong bull-run despite the selloffs and profit booking in Nestle and Dangote Cement, among others, but buying interests in blue chip companies and dividend paying stocks that had rallied supported the growth trend in the face of the latest rates hike, uncertainties around the 2023 general election, and the slow economic growth.
Specifically, market capitalisation of listed equities which opened the year at N27.915 trillion appreciated by N1.082 trillion or 3.87 per cent to close at N28.977 trillion.
Also the NGX All Share Index appreciated by 1987.61 basis points to close at 53238.67 points from 51251.06 it opened January this year.
Available data indicated that
the market opened the year on strong buying interests that impacted positively on the index and stock prices, pushing them in a positive direction.
The upward movement resulted to breaking down of various resistance levels forcing the index to reach 53,000 mark heading to 54,212 basis points in- the last peak.
Volume of trades for the month went up slightly by 0.07 per cent, at 4,462 billion shares, as against 4,459 billion units recorded in the preceding month, just as market breadth for the month was positive with advancers outnumbering decliners in the ratio of 76:18 to sustain the December position growth trend that resulted in the Investment in blue ship companies and dividend paying stocks.
Sectorial Performance
The NGX trading report for the month further revealed that the sectorial indexes closed in a bullish note.
The NGX Banking, Consumer Goods, Energy, Insurance, Industrial Goods and other indexes boosted activities of the market during the month, outperforming the general market.
For instance the NGX Growth and Banking indexes recorded a total gain of 15.45 per cent and 7.51 per cent respectively. The two index were driven by market sentiment for low cap stocks and rebound recorded in banking stocks.
However, the NGX’s Dividend Yield index was supported by price appreciations in dividend paying stocks with high yield that recorded 4.8 per cent ; the NGX mainboard index grow by 4.02 per cent , to support the market performance during the period.
Operators views
Capital operators said that the good performance in the market was due to appreciation in the prices of blue ship stocks.
They stated that investors’ positive sentiment and the clear decision among traders, as the market’s Price-To-Earnings Ratio went very low contribute to the growth profile.
According to the Chief Operating officer Investdata Consulting Limited, Mr Ambrose Omordion, “The bull-run during the month was influenced by the appreciation in the prices of high caps, like Geregu Power, BUA Foods, BUA Cement, MTNN and other shares. They helped January patterns repeat itself and extended the bullish run for three consecutive months, due to the presence of the usual Santa Claus rally and low valuation.”
He said at the end of January, the Nigerian equity market continued December’s positive outing, rallying to support the recovery since March 2020. This was despite the uptick in inflation rate to 21.47 per cent that slowed down in the month of December to 21.34 per cent according to data from the National Bureau of Statistics (NBS).
He stated that the trading metrics and patterns on the Nigerian Exchange (NGX) in January, the first month of the year, signaled a trend continuation 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.
He pointed out that the first full year financial audited result from MTN Nigeria released by NGX with impressive performance and offer of N10 dividend per share boosted activities in the market.
He explained that the positive responses to the better-than-expected numbers as of release dates and positioning in mispriced stocks by investors had supported the price rally and market uptrend. This according to him confirmed the inflow of funds into equities, and confidence in the market.
He noted that the unaudited scorecards of various listed companies have given insight as to the real state of the economy and the companies in fourth quarter.
Managing Director APT Securities and Fund Limited, Malam Garba Kurfi said that the month of January always have market rally in the last four years.
He said transactions for the period closed with 3.88 per cent this times but lower than previous years.
He said lower performance could be probably due to the forth coming Election, scarcity of funds and fuel scarcity and insecurity in the country.
He expressed optimism that the rally may continue in the month of February due to late release of 12 months and Audited accounts. of quoted companies. He attributed the market performance on high capitalisation stocks, especially on gained recorded by AIRTELAFRI, MTNN, Dangote Cement among others
Best And Worst Performing Stocks
On the best-performing stocks, within the month under review according to capital market operators ,the market were predominantly a combination of low, medium and high caps across the sectors.
The best stocks for the month was led by International Energy Insurance, which gained 97.37 per cent, as a result of its low price attraction and ongoing Mandatory Takeover bid priced at N1.60 by Norrenberger Advisory Services. It was followed by John Holt and Mutual Benefits Assurance with 82.19 per cent and 44.44 per cent respectively. Thomas Wyatt went up by 35.05 per cent , on market sentiment, while Geregu Power rose by 29.93 per cent and; among others.
On the other hand, the stock that recorded worst performance was Royal Exchange Assurance which lost 33.02 per cent, due to selloffs and unimpressive earnings performance; followed by Champion Breweries which shed 12.73 per cent due to profit taking from its recent rally. Honeywell Flourmill’s share price fell by a further 11.11 per cent, showing an apparent lack of investor confidence in the company due to recent Supreme Court judgement against the company concerning its N5.5 billion debt to Ecobank Nigeria, an arm of Ecobank Transnational Incorporated. The situation made worsen by its unimpressive third quarter financial scorecard.
NCR also lost 10 per cent 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.
Outlook
Operators expected that the market will witness another round volatility, adding that the general outlook remains mixed due to likely price corrections, or pullbacks for a few days, due to profit taking and portfolio reshuffling ahead of year-end and 2023 corporate actions and election.
They pointed out that the anticipated correction in the new month will, however, strengthen recovery, despite the rise in inflation, insecurity and the global economic headwinds.
Operators encourage investors not to be greedy at this point, but let their decisions be guided by their investment goals and exit strategies, even as the healthy inflow of funds into the equity assets due to prevailing rates disconnection in money market is likely to continued till next NTB primary auction and MPC meeting.
