Roundup: Insurance, Oil & Gas Indices Drive NSEASI Up, As Market Cap Gains 5.37% In January, 2021
Market Roundup for January
January was another great month as the Nigerian stock market started the year 2021 on a bullish note, extending the ‘V’ sharp market recovery and bull ascendance, driven by positive sentiment, the inflow of funds from the fixed income market, oscillating oil price, corporate earnings expectations and other factors that had supported the equity market in 2020.
The prevailing trading pattern, market holding structure and the outcome of the Central Bank of Nigeria’s first Monetary Policy Committee meeting which left all monetary instruments unchanged, thereby opting to keep interest rate low and in the process, propel economic recovery from recession.
There was also the impact of the better-than-expected Q3 numbers from March year-end accounts and unaudited 2020 full year earnings released so far in the midst of a lingering economic downturn resulting from the Coronavirus (COVID-19) pandemic and the lingering second wave. Irrespective of ongoing recession, positive buying sentiments for blue-chip and growth stocks continued to wax strong as the earnings reporting season draws closer.
The equity market has maintained its uptrend and recovery since April 2020, despite the seeming disconnection from the current economic realities, sustaining seven consecutive months of bull-run, as transaction volume remained on the rise, with positive breadth that reflected strong liquidity fundamentals and investor confidence. This was despite the country’s rising inflation in the month of December at 15.75%, according to data from the National Bureau of Statistics (NBS).
Trading on the Nigerian Stock Exchange (NSE) in January, the first month of the year, ended on a positive note, even as Friday’s market rally suggests 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.
The positive responses to the mixed numbers as at release dates and positioning in mispriced stocks by investors hves pushed many equities to new 52-week highs, confirming the high liquidity and confidence in the market.
As noted earlier, the unaudited scorecards of various listed companies have exposed the real state of the economy in Q4, besides giving an insight into what the Q4 GDP will look like when eventually published by the NBS.
The possibility of prices rallying further from here is high, amidst portfolio reshuffling on the strength of the Q3 and unaudited 2020 full year numbers, just as investors would be assured of reward in the form of dividends when theaudited full-year score-cards begin to flow into the market, despite the possibility of dividend cuts.
In the 19 trading sessions of January, the NSE All-Share index recorded gains in 13 sessions and was down in six, resulting in 5.32% year-to-date gain, even as we note the overbought state of quoted companies, their fundamentals, and the possibility of the seemingly high dividend yields attracting more inflows to the market. This is given that many equities are selling new 52-week highs.
Meanwhile, the benchmark Index in the month gained a total of 2,141.94 basis points, closing at 42,412.66bps, after touching high of 42,444.22bps from a low of 39,724.25bps for the month, compared to the 40,270.72bps at which it opened, on strong buying interests that impacted positively on the index and stock prices, pushing them further up to breakout various resistance level and 42,000 psychological line.
Total ‘buy’ volume for the month was 99% and 1% sell position, further extending the bull transition from last year, while volume index for the period was 1.78. Market capitalization rose by N1.13tr, closing at N22.19tr, from N21.06tr, representing a 5.37% appreciation in value.
Traded volume for the period was up 31.73%, at 11.79bn shares, as against 8.95bn units recorded in the preceding month, just as market breadth for the month was positive with advancers outnumbering decliners in the ratio of 87:22 to extend the seven months of up market that resulted from factors mentioned above.
Bullish Sectorial Performance
All the sectorial performance indexes and other NSE indices were bullish except for the NSE Growth index that closed 3.22% in the red. As shown by the chart below, the NSE Insurance, energy, Banking and Consumer Goods indexes boosted the market the most during the month, outperforming the general market. The NSE Insurance index gained a total of 29.77%, driven by expected merger and acquisition of smaller insurance companies by big names in the sector and banks currently seeking approvals to adopt the holding company structure that may acquire operators in the underwriting industry. The NSE’s Div Yield index that was supported by price appreciations in dividend paying stocks with high yield that recorded 14.43%; the NSE Oil/Gas index garnered 12.43%, also faster than the composite NSEASI during the period.
Others are represented in the chart below, revealing investors’ positive sentiment and the clear decision among traders, as the market’s Price-To-Earnings Ratio is more than 15times of early last year’s 11.06x.
It is also worthy of note that no sectoral index closed in red during the month as the NSE Banking, Consumer and Industrial Goods, notched 7.89%, 7.04% and 1.41% respectively on the strength of repositioning for expected 2020 full-year earnings reports and dividend.
Source: Investdata Research
Best And Worst Performing Stocks For January
The best-performing stocks for the month under review were predominantly low and medium caps across the consumer goods, insurance, agribusiness and oil marketing sectors, led by Champion Breweries, which gained 261.63% as its institutional investor- Nigerian Breweries, increased its stake to 84%. It was followed by Livestock Feeds’ 85.61%; and the 73.08% notch by Linkage Assurance. Mutual Benefits Assurance climbed 59.26% up, on positive sentiment for sector recapitalization moves; just as NCR chalked 59.18%; among others.
Best Performing Stocks in January
Securities Sector Open Close % Change
Champion Breweries Consumer Goods 0.86 3.11 261.63
Livestock Feeds Agribusiness 1.39 2.58 85.61
Linkage Assurance Insurance 0.52 0.90 73.08
Mutual Benefits Assur Insurance 0.27 0.43 59.26
NCR ICT 1.96 3.12 59.18
BOC GAS Industrial Goods 9.57 15.12 57.99
Regency Insurance Insurance 0.22 0.34 54.55
Royal Exchange Assur Insurance 0.26 0.40 53.85
Japaul Gold Oil/Gas 0.62 0.91 46.73
NNFM Consumer Goods 6.74 9.68 43.62
Source: Investdata Research
The worst performing stock was Deap Capital, which lost 20%, amidst selloffs and market forces; followed by FTN Cocoa’s 16.67% slide due to weak fundamentals and profit taking from its recent rally. Oando’s share price declined by a further 11.35% showing an apparent lack of investor confidence in the company owing to its failure to present financials arising from the face-off with the Securities & Exchange Commission (SEC) apex regulator of the Nigerian capital market. MRS Oil lost 10.55% of the year’s opening value, due to the unimpressive earnings.
Worst Performing Stocks in January
Securities Sector Open Close % Change
Deap Capital Other Financial 0.25 0.20 -20.00
FTN Cocoa Agribusiness 0.66 0.55 -16.67
Oando Oil/Gas 3.70 3.28 -11.35
MRS Oil Oil/Gas 13.75 12.30 -10.55
Skyway Aviation Services 3.20 2.88 -10.00
Sunu Assurance Insurance 1.00 0.90 -10.00
DaarComm Services 0.30 0.27 -10.00
Challaram Conglomerates 2.51 2.26 -10.00
Tourist Company Services 3.15 2.84 -9.84
ABC Transport Services 0.38 0.35 -7.89
Source: Investdata Research
Technical View
Source: Investdata Research
The NSE’s Index action for the month of January revealed an uptrend and a saucer chart pattern that supports trend continuation, as the index is set to breakout another strong resistance level of 43,330.32bps ahead of the audited financial reports. At the same time, it is trading above its 50-Day Moving Average on the monthly chart, with positive sentiments and high traded volume.
The market is still trading within the V-shape recovery pattern, despite the likely mixed trend on profit taking and price correction, any moment from now, depending on market forces. The benchmark index has entered the overbought region on a weekly and daily time frame, reflecting an increased inflow of funds that pushed stock prices up in the first month of 2021, going against the age-long January effects tradition, while maintaining the pattern of uptrend during the month in recent year.
The trading patterns and momentum going forward are likely to change, as investors react to the expected audited full-year earnings news, portfolio rebalancing and repositioning, with early filers kicking off the season in February with dividend news.
Market technicals for the month were positive, a situation expected to remain unchanged in the new month.
Market Outlook
Volatility is expected to continue in the new month, even as the 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 2021 corporate actions. The anticipated correction in the new month will strengthen recovery. Despite the rising inflation, insecurity and the second wave of coronavirus, as this wave will further boost the healthcare sector due to government and CBN commitment to enhance public health.
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 due to prevailing low rates in money market is likely to continued even as the last MPC meeting has reduced fear of funds leaving the market in the interim.
Again, the current breakouts of resistance levels 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.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdataonline.com
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08032055467
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