Market Update for December 7
It was a mixed session on the Nigerian Exchange at the midweek, with profit taking resurfacing amidst price adjustments, buying sentiments and negative market breadth on a less than average traded volume. The benchmark NGX All-Share index closed marginally higher, extending the bull and strong momentum for the fourth successive sessions in the midst of selloffs hitting the major sectors of the market.
The market slowdown is gaining momentum ahead of the strong resistance level of 48,836.70 basis points on a low traded volume at the end of trading, a sign of traders cashing out recent gains as market players await positive news or trigger to continue the uptrend, just as treasury bill primary auction yields rates recorded a decline across the tenors. Specifically, long term tenor fell by 1.79% to 13.05% from 14.84% in the midst of oversubscription. Expectations are that this excess liquidity or funds would trickle down to the equity space, especially those with high dividend yields and shorter time frame to achieve similar returns with possibility of capital gains. With the Santa Claus rally around the corner, just as year-end window dressing by fund managers and listed companies that want to close the year higher.
The market moving higher to form a topping pattern that could suggests correction is underway in the face of rallying stock prices and profit taking by short term traders, as all eyes are on the 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, 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.
ADX reads 49.32 at the end of the session, just as, RSI and Money Flow Index looked up to read 75.97 and 94.48 points respectively. The continuation of this strong strength behind the uptrend depends largely on the interplay of market forces and inflow of funds into 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 oscillating volume traded pattern 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 trades at $78.08 on partial reopening of some province in Chain after Covid 19 restriction, 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.
Meanwhile, Wednesday’s trading opened slightly in the upside, and was sustained throughout the session, despite profit taking and buying interests in consumer goods stocks, a situation that pushed the NGX’s index to an intraday high of 48,426.49bps from its lows of 48,348.678bps before closing slightly above its opening level at 48,426.49bps.
Market technicals were positive and mixed, with lower volume of trade than the previous session in the midst of breadth favoring the bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 0.84 points, just as energy behind the day’s performance was strong as Money Flow Index was looking up at 94.48 pts, from the previous day’s 94.33pts, indicating that funds entered in the market.
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Index and Market Caps
At the close of midweek’s trading, the composite NGX All-Share Index inched up 59.80 basis points, closing at 48,426.49bps, after opening at 48,366.09bps, representing a 0.12% up, just as market capitalization rose by N32.58bn closing at N26.38tr from the previous day’s N26.34tr, which also represented a 0.12% value gain.
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The upturn was driven by position-taking in Nestle, NB, Geregu Power, Fidelity Bank, May/Baker, Honeywell and FCMB, among others, which impacted positively on Year-To-Date gain, increasing it to 13.37%. Market capitalization gain YTD stood at N4.03tr, representing a 18.28% rise over the opening level for the year.
Bearish Sector Indices
Sectorial performance indexes were in red, except for NGX Consumer goods that closed 0.99% higher, while the NGX Insurance index led the decliners after shedding 0.55% followed by Banking and Energy with 0.17% and 0.08% respectively. Just as NGX Industrial goods was flat.
Market breadth turned negative as losers outpaced gainers in the ratio of 17:12; just as transactions in volume and value were down as investors exchanged 146.21m shares worth N3.36bn. Volume was driven by trades in FBNH, Geregu power, Zenith Bank, Sterling Bank and UBA.
Thomaswy and Japaul Gold were the best performing stocks, after gaining 10% and 7.41%, closing at N0.44 and N0.29 per share respectively on market forces. On the flip side, SCOA and Unity Bank lost 9.38% and 7.02% respectively, closing at N0.87 and N0.53 per share, purely on selloffs.
We expect buying interests in stocks that pulled back to support an uptrend in the midst of low price attraction and strong momentum 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.
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605