Buying Interest In High Caps May Support Uptrend Amidst Mixed Sentiment, Profit Taking

Market Update for December 6

The bull sentiment and strong momentum on the Nigerian Exchange continued for the third consecutive day on Tuesday, as the benchmark NGX All-Share index closed higher, in the midst of increased buying interest across the major sectors of the market and positive market breadth.

Equity prices followed through on high traded volume at the end of the day’s trading session, sustaining the uptrend, despite the profit taking that hit energy stocks, especially Oando and Geregu power, among others. The index’s action headed towards the 200-day moving average and another strong resistance level of 48,890.70 basis points, a breakout of which will confirm continuation of the bull rally in expectation of Santa Claus and year-end window dressing by fund managers and listed companies that want to close the year higher.

The market is moving higher to forming a topping pattern that could suggest that a correction is underway in the face of rallying stock prices and profit taking by short term traders, while all eyes remain on 2023 corporate actions, with the prevailing high dividend yields across the market. As such, we expect position taking to continue ahead of the full-year earnings season, as bargain hunters and speculators take advantage of any pullback or selloffs to buy low, amid a high volatility. Therefore, investors should target companies with a consistent track record of dividend payment with strong fundamentals and growth prospect that will support further price and payout.

Technically, the market is on its markup phase, setting the stage for another uptrend after forming a cup and handle chart pattern on a daily time frame. The ongoing intraday oscillation was due to profit taking and portfolio repositioning, as revealed by momentum indicators for the day which were strong.

These indicators, include the ADX that reads 48.70, RSI at 75.61 while Money Flow Index is looking up to read 94.33 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds into equity market as trading open this morning. Market players continue to digest the mixed macroeconomic data and Q3 company fundamentals in the midst of year-end seasonality and expected 2023 unaudited accounts in January, alongside the election uncertainty.

The seemingly high traded volume suggests the gradual return of many players who had been seating on the fence before now, including institutional investors holding cash to confirm the primary’s market direction, especially given the anticipated financial market reset in 2023, and beyond expected to create wealth for action takers are underway.

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Oil price oscillation continued, as it pulled back to trade below $80 on China entering another phase of Covid crisis after the protest, Russia’s oil price caped kicks off in the midst of Saudi cutting production, geopolitical tension and fear of recession as a result of high interest rate and inflation across the globe. Also, supply tightened due to the Russia-Ukraine war that has been lingering. The up and down movement of oil price also continues to drive volatility.

Tuesday trading started slightly in the green, and was sustained for the rest of the session, despite profit taking and demand for highly priced stocks and others, a situation that pushed the NGX’s index to an intraday high of 48,399.33bps from its lows of 48,269.48bps before closing above its opening level at 48,366.69bps.

Market technicals were positive and strong, with higher volume of trade than the previous session in the midst of breadth that favored the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 75% buy position and 25% sell volume. The total transaction volume index stood at 1.08 points, just as impetus  behind the day’s performance was strong as Money Flow Index was looking up at 94.33 pts, from the previous day’s 94.22pts, indicating that funds entered in the market.

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Index and Market Caps

The NGX All-Share Index closed gained 96.57 basis points, closing at 48,366.09 basis points after opening at 48,270.23bps, representing a 0.20% up, just as market capitalization rose by N52.54bn closing at N26.34tr from the previous day’s N26.29tr, which also represented a 0.20% value gain.

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Meanwhile, the session upturn was driven by position-taking in BUA Cement, ETI, NASCON, Africa Prudential, Champion Brew, Livestock Feeds and Jaiz Bank, among others, which impacted positively on Year-To-Date gain, increasing it to 13.23%. Market capitalization gain YTD stood at N3.97tr, representing a 18.15% rise over the opening level for the year.

Bullish Sector Indices

All the Sectorial performance indexes were up, except for NGX Oil/Gas that closed 0.38% lower, while the NGX Industrial goods index led the advancers after gaining 1.21% followed by Insurance, Consumer goods and Banking with 0.18%, 0.14% and 0.03% respectively.

Market breadth was positive, as gainers outnumbered losers in the ratio of 16:13; just as transactions in volume and value were down as stockbrokers traded 184.66m shares worth N3.57bn. Volume was driven by trades in FBNH, Trancorp, Geregu power, Accesscorp and RT Briscoe.

Honeywell Flour and Champion Brew were the best performing stocks, after gaining 8.06% and 7.14%, closing at N2.28 and N3.75 per share respectively on market forces. On the flip side, UPDC and Wema Bank lost 7.07% and 6.12% respectively, closing at N0.92 and N3.22 per share, purely on profit taking.

Market Outlook

We expect buying interest in high cap stocks to support uptrend in the midst of mixed sentiment and trend as profit taking and portfolio reshuffling continue ahead of year end seasonality in the face of election uncertainty, as pullbacks add more strength to upside potential, so investors should take advantage of price correction ahead of year end seasonality. Also looking at the trends and events across the globe and domestically.

Ambrose Omordion

CRO|Investdata Consulting Ltd

Tel: 08028164085, 08179547605