Expect Mixed Sentiment On Bargain Hunting, Ahead Of Year-end Seasonality, Election Uncertainty

Market Update for December 19

The last full trading week on the Nigerian Exchange before the Christmas holidays, started on a positive note, thereby extending the bull-run for the fourth successive sessions on a low traded volume and buying pressure. As the benchmark NGX All Share index closed higher to sustain the strong momentum on increasing flow of funds into undervalued stocks with high dividend yields and strong earnings that will support payout and price.

Despite the topping chart pattern formation that supports reversal or continuation of trend, after the market had witness for more than five weeks Santa Claus rally on positive sentiments and buying interests of bargain hunters across the major sectors of the market. This is ahead of the full-year financial reports with companies already notifying the investing public of their board meetings, and closed period to guide player’s decision.

The seeming improvement in market fundamentals and mixed macroeconomic data in the face of changing yield environment in the fixed income market as revealed by the recent TB primary market auction rates and yield which had suffered a decline across all tenors. Also, the time frame for realizing such yields in the equity space remain shorter, as portfolio reshuffling continued ahead of year end window dressing by fund managers and listed companies that want to close the year higher than it opening price for the year.

The oscillating volume pattern in the face of the expected closed period notification and 2023 corporate actions, just as position taking continues ahead of the full-year earnings season, while 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 prospects that will support further growth in price and payout.

Technically, the market has extended its markup phase after forming a cup and handle chart pattern on a daily and weekly time frame.  But there is a divergent between the index action and MACD which also support pullback, so let us keep our gaze on market forces and money flow.  The momentum indicators appear stronger, as the ADX read 53.17 at the end of the day, just as, RSI and Money Flow Index are looking up to read 80.52 and 92.95 points against the previous session 79.91 and 87.56 points respectively. As volume trading 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.

To navigate the rest of the year profitably using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “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 range market. Despite the low volume of transaction witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

Oil price oscillation continued, trading at $80.19 per barrel on EU gas price cap numbers are silly, as unclear cases of Covid 19 in China and its restriction or reopening in the midst of 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.

Monday trading opened in the upside and it was sustained throughout the session, on position taking and slightly selloffs in some stocks, a situation that pushed the NGX’s index to an intraday high of 49,414.96 basis points from its lows of 49,316.20bps before closing above its opening level at 49,414.96bps.

Market technicals were positive and mixed, with lower volume of trade compared to the previous session in the midst of breadth favoring the bulls 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 0.47 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 92.95pts, from the previous day’s 87.56pts, indicating that funds entered the market.

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Index and Market Caps

At the end of the day’s trading, the NGX All-Share Index gained 98.67bps, closing at 49,414.96bps after opening at 49,316.29bps, representing a 0.20% up, just as market capitalization rose by N53.24bn closing at N26.91tr from the previous day’s N26.86tr, which also represented a 0.20% appreciation in value.

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Meanwhile, the session upturn was driven by buying interests in the shares of GTCO, BUA Foods, Fidson Healthcare, International Breweries, CHI Plc, Pharma Deko, Cutix and Caverton, among others, which impacted positively on Year-To-Date gain, increasing it to 15.68%. Market capitalization YTD gain increased slightly to N4.84tr, representing 20.71% rise over the opening level for the year.

Mixed Sector Indices

Sectorial performance indexes for the session were mixed as  NGX Insurance and energy closed lower by 0.05% and 0.01% respectively, while NGX Consumer goods led the advancers after gaining 1.00%, followed by banking with 0.12%. Just as NGX Industrial goods closed flat.

Market breadth was positive as gainers outnumbered loser in the ratio of 13:9; just as transactions in volume and value were down, after investors exchanged 72.36m shares worth N1.23bn. Volume was driven by trades in GTCO, UBA, Chams, Consolidated Hallmark Insurance and Zenith Bank.

Thomaswy and International Breweries were the best performing stocks, after gaining 8.77% and 5.81%, closing at N0.62 and N4.55per share respectively on market forces. On the flip side, PZ and Chams lost 7.26% and 4.35% respectively, closing at N11.50 and N0.22per share, purely on profit taking.

Market Outlook

We expect sustained trend and mixed sentiment on profit taking and positioning by bargain hunters ahead of holidays and 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.

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