Bullish Sentiment Persists On NGX Amidst Christmas Holidays, Profit Taking

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The Nigerian Exchange (NGX) recorded a three-day trading week as the Federal Government declared December 25 and 26 public holidays for the Christmas celebrations. Investors traded 1.387bn shares worth N52.023bn in 33,411 deals, compared to the previous week’s 2.536bn shares valued at N91.382bn in 51,406 deals.

NGXASI WEEKLY CHART

The Financial Services Industry led activities, accounting for 881.646m shares valued at N17.774bn, followed by the Oil and Gas sector with 103.763m shares worth N12.438bn. Top equities traded included United Bank for Africa Plc, Universal Insurance Plc, and Zenith Bank Plc, contributing over 21% of the total volume.The NGX All-Share Index appreciated by 0.99%, closing at 102,133.30 basis points, while Market Capitalization ended the week at N61.912tr.

Ikeja Hotel Weekly Chart

Ikeja Hotels Plc, a key player in Nigeria’s hospitality sector led the gainers, surging by 32.79% to close at N12.15 each. The company’s growth reflects an increasing investor confidence, likely fuelled by improved patronage during the festive season and optimism about the sector’s recovery. Other top gainers included Multiverse Mining and Exploration Plc, which rose 32.61% to N6.10; PZ Cussons Nigeria Plc, gained 26.09% at N29.00 per share; Universal Insurance Plc, notched 25.00% to N0.55; and Royal Exchange Plc, up 24.66% to N0.91 per unit.

Thomas Wyatt Weekly Chart

Conversely, Thomas Wyatt Nigeria Plc, a longstanding company in Nigeria’s paper manufacturing and packaging industry led the losers, declining by 10.00% to close at N1.71 each. The drop may reflect challenges in raw material sourcing, or competition in the industry, especially from smaller players. Other notable losers included Aradel Holdings Plc, which fell 9.64% to N600.00; Austin Laz & Company Plc, dropping 9.29% to N1.66; DAAR Communications Plc, down 6.45% to N0.58; and Neimeth International Pharmaceuticals Plc, shedding 5.00% to close at N1.90.

The week saw 64 equity prices appreciating up from 61 in the previous week, while 20 equities depreciated, an improvement from the 26 recorded last week.

Trending in the Economy: Nigeria has ended the five-year mining ban in Zamfara State, citing improved security conditions. The ban, imposed in 2019 due to rampant bandit attacks had disrupted the exploitation of the state’s abundant mineral resources, including gold and copper.

The Minister, Dele Alake commended the progress in addressing insecurity, enabling the mining sector to resume its contribution to national revenue and Gross Domestic Product (GDP). However, illegal mining activities have continued despite the prohibition.

As part of its efforts to revitalize the mining industry, Nigeria is implementing new reforms and forging international partnerships. These include technical and financial support agreements with countries such as France, Germany, and Australia.

Global Market and Oil: U.S stocks concluded Christmas week on Friday with pullbacks from double-digit uptrends. Both equities and the dollar, though to a lesser extent, faced profit-taking amid thin trading volumes as markets prepared for the final weekend of 2024.

Despite Friday’s modest decline, the U.S. Dollar remained on track for a nearly 7% annual gain. Investors were optimistic about strong U.S. growth prospects and anticipated policy changes, including tax cuts, tariffs, and deregulation under President-elect Donald Trump’s administration, which could prompt the Federal Reserve to adopt a cautious approach to rate cuts through 2025.

Wall Street’s main indexes saw increased selling pressure throughout the morning, dampening the optimism from a week that initially displayed signs of a traditional year-end rally, capping off a remarkable year for stocks.

“The Santa Claus rally arrived a bit earlier this year. I believe the recent pullback is due to profit-taking ahead of another holiday-shortened week,” said Jeff Schulze, Head of Economic and Market Strategy at Clearbridge Investments.

“This isn’t causing significant concern because it’s not uncommon for markets to experience air pockets in low-volume trading,” he added.

Leading the decline were the high-performing “Magnificent 7” tech stocks, including Tesla, which dropped 4.9%, alongside Amazon, Microsoft, and Nvidia.

The S&P 500 fell 1.11% but still managed a 0.67% weekly gain. The Nasdaq Composite ended 1.49% lower, recovering slightly after being down over 2% earlier in the session. The Dow Jones Industrial Average dropped 0.77%. For the year, the Dow is up 14%, the S&P 500 has climbed 25%, and the Nasdaq has surged 31%.

“There are reports that pension funds are rebalancing ahead of year-end, selling equities to buy bonds,” noted Steve Sosnick, chief market strategist at Interactive Brokers. He added that this could explain the sudden sell-off in the absence of major news, with megacap tech stocks bearing the brunt due to their significant weighting in key indices.

Globally, MSCI’s broad share index dropped 0.59% on Friday but recorded a 1.45% gain for the week. In Asia, MSCI’s Asia-Pacific index excluding Japan edged 0.1% lower but posted a 1.5% weekly rise, while Tokyo’s Nikkei gained 1.8%. Europe’s Stoxx 600 rose 0.67% on Friday and ended the week up about 1%.

“There’s some room for this bull market to extend further, but the upside is limited,” said Luca Paolini, chief strategist at Pictet Asset Management. “Trump’s inauguration could mark an inflection point, with much of the good news already priced in by then.”

The dollar index, which measures the currency against six major peers, slipped 0.06% on Friday but ended the week 0.2% higher and posted a 6.6% gain for 2024.

Oil prices rose over 1% on Friday, marking a weekly gain in thin year-end trading volumes. This increase was supported by a larger-than-expected draw down in U.S. crude inventories. Brent crude futures settled at $74.17 per barrel, up 91 cents or 1.2%, while U.S. West Texas Intermediate (WTI) crude futures ended at $70.60 per barrel, rising 98 cents or 1.4%. Both benchmarks recorded weekly gains of about 1.4%.

U.S. crude inventories fell by 4.2 million barrels in the week ending December 20, as refiners ramped up activity amid increased fuel demand during the holiday season, exceeding analysts’ expectations of a 1.9-million-barrel draw down. Optimism over China’s economic growth also fueled hopes for stronger oil demand next year, with the World Bank raising its growth forecasts and Beijing planning to issue $411 billion in special treasury bonds to stimulate its economy.

Geopolitical tensions added complexity to the energy markets. The conflict between Russia and Ukraine resurfaced as a concern after Finland seized a Russian oil-carrying ship suspected of causing infrastructure disruptions. NATO plans to increase its Baltic Sea presence, while Dutch and British gas prices rose due to stalled negotiations over Russian gas transit through Ukraine. Meanwhile, tensions in the Middle East, including Israeli operations in Gaza and strikes on Houthi targets in Yemen, are seen as less likely to influence oil prices significantly in the near term.

Earlier in the week, Brent crude settled at $72.63 on Monday, rose to $73.58 on Tuesday, and closed the week at $74.17 on Friday, while WTI crude moved from $69.24 on Monday to $70.10 on Tuesday and ended at $70.60 on Friday.

Technicals

The market has traded confidently above the 8-day moving average, breaking through the 102,000 strong psychological level. The northward movement was driven by strong buying pressure and current Santa Claus in the market. There are a lot of funds in the market as indicated by money reading of 94.37. This huge inflow is a big sign of investors confidence in our local market. The market is already at the overbought region and market can correct anytime soon before upward trend continuation.

NGX Banking Index Weekly Chart