Market Update for February 18
The negative outing of the Nigerian Exchange continued on Tuesday due to selloffs and profit taking activities across mid to high cap stocks that put pressure on the benchmark NGX All-Share Index, which closed lower on a negative market breadth and low traded volume. This extended the bear transition for three consecutive sessions in the midst of corporate earnings expectations and dividend announcements, even as market players continued to digest the rebased January inflation figure of 24.48%, compared to the December 2024 level of 34.84% as released by National Bureau of Statistics. Also, the Central Bank of Nigeria policy meeting is slated to hold February 19 and 20, 2025. These economic events are expected to shape sentiment in the Nigerian financial market, even as all eyes are on the expected inflow of audited accounts and 2024Q4 GDP reports.
The mixed sentiment and pullbacks on the NGX calls for caution as more stocks record suffered pullbacks during the session in the midst of the earnings season and expected full-year audited accounts which will continue to guide positioning and money flow into the market. Profit taking in financial stocks and others supported the distribution phase that is creating new buying opportunities for stocks ahead of their earnings reports. This downtrend in the face of volatility was as a result of portfolio realignment and players searching value in stocks that are yet to rally, by focusing on low valuation and growth opportunities inherent in the different stocks and industries.
The NGX’s waves and correction are short term traders profit taking-driven in addition to positioning in preparation for more audited scorecards inflow and dividend expectation this season. Importantly also, dividend payout and yields remain very important to players at a time like this, when there is over-subscription in TB auction and rates are declining in recent time. Knowing that one day does not change a trend and it does not change outlook especially with reactions to earnings as market players are digesting these impressive numbers and making their decisions.
Investors should target dividend paying companies, as pullbacks will impact dividend yields positively and provide room for higher upside that support capital gain. This is due to market had entered overbought region that signal price adjustment and correction in the midst of selling sentiments for some sectors, consolidation moves in some industries and expectations of positive corporate numbers from some others, based on their quarterly and full year unaudited performance, coupled with their dividend payouts history.
Technically, money flow and other momentum tools were down, revealing weakness and present opportunities of buying low and selling high in the midst ongoing volatility and mixed sentiment. The index inched down to signal caution thereby creating the perfect setup for high probability of continuation to catch dividend season repositioning at the right price. Also, as the index still trades above the T-line and the two moving averages of 50-EMA and 50-SMA, this indicates relatively strength in the face of changing market fundamentals and technicals on the NGX and the economy.
The NGX had entered decline phase, even as it is resisting further decline in the face of mixed sentiment, as revealed by candlestick formation and momentum indicators. As ADX was up to read 42.02points, while RSI and Money Flow Index were down at 67.41 and 67.57 points against the previous session’s 69.80 and 72.77 points respectively. Consequently, market players should watch this current trend and trade with caution in the face of funds leaving the market on a mixed sentiment in some sectors and profit taking in others on a daily time frame. Also, trading volume pattern continued to oscillates, suggesting smart money are locking in traders into bad position amid players revaluing the market and short term opportunities, looking at economic events in the face of policy direction of the government that look inconsistent and global economic outlook in the face of trade war tension.
To navigate the rest of Q1 and beyond profitably, it is important to run with economic events, fundamental and technical analysis, join investdata live sessions at noon every Monday, Wednesday and Friday’s trading session “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 pullbacks. Despite the oscillating volume of transaction witnessed in recent time, it is time to position in undervalued stocks, sectors and the next insider playing opportunity.
Oil prices on Tuesday rebounded to continue its oscillation, as it trades at $76.21 per barrel in the midst of expected peace talk Russia and Ukraine, increasing US stockpile and trade war dampening sentiment in commodity market. Even as OPEC delay production cut to April 2025. Looking at the ceasefire deal in the Middle East, while Russia and Ukraine war continue. As all eyes are on US President Policy uncertainty continued to drive volatility. The geopolitical tension across many economies remains a concern to the global economy and energy consumption in 2025. This trend may likely continue, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.
Meanwhile, Tuesday’s trading started in the downside and was sustained for the rest of the session, despite oscillating on profit taking in Cadbury, Eterna, Ellah Lakes, Oando, GTCO, FBNH and others. The situation pushed the NGX’s index to an intra-day low of 107.529.70bps from its highs of 107,964.40bps, before closing below its opening level at 107,671.00bps.
Market technicals were negative and mixed with lower volume when compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 33% buy position and 67% sell volume. The total transaction volume index stood at 0.76points, just as impetus behind the day’s performance was strong as Money Flow Index inched lower to read 67.57pts, from the previous day’s 72.77pts, indicating that funds entered the market, despite closing lower.
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Index and Market Caps
At the end of Tuesday, the composite NGX All-Share Index shed 266.76basis points, closing at 107,671.00bps from 107,937.74bps, representing a 0.25% decline, while market capitalization fell by N166bn, at N67.18r from the previous day’s N67.35tr, representing a 0.25% depreciation in value.
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The session downturn was driven by selloffs and profit taking in the shares of First Holdings, Oando, Eterna, Cadbury, GTCO, UBA, Accesscorp, Honeywell and Learn Africa, among others. This impacted mildly on Year-To-Date gain that slide to 4.61%, while Market capitalization gain stood at N5.46tr, representing 7.03% increase over its opening level for the year.
Bearish Sector Indices
Sectoral performance indexes were down, except for the NGX Insurance index that closed higher by 2.63%, while the NGX Banking index led the decliners after losing 1.02%% followed by Consumer goods, Energy and Industrial goods with 0.39%, 0.24% and 0.18% respectively.
Market breadth was negative, as losers outnumbered gainers in the ratio of 39:16, while activities in volume and value were down after investors exchanged 408.72 million shares worth N11.26bn. Volume was driven by trades in Accesscorp, UBA, Guinness, Fidelity Bank and Zenith Bank.
Conhall Plc and Sunu Assurance were the best performing stocks, gaining 9.76% and 9.58% respectively, closing at N3.71 and N6.52 per share respectively on the back of sentiment and market forces. On the flip side, Union Dicon and UPDC lost 9.82% and 9.09%, closing at N7.35 and N3.10per share, purely on selloffs and profit taking.
Market Outlook
We expect wait and see disposition, as all eyes are on MPC meeting outcome, even as profit taking and portfolio reshuffling continue on mixed sentiment and cautious trading. As more earnings are expected to hit the market with dividend announcement. Also, sector rotation and portfolio rebalancing continued in the market with investors taking advantage of price correction to buy into value.
This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
