Expect Mixed Trend, As Selloffs Subside On Assets Rebalancing, Seasonality, Cycles
Market Update for December 2
The bearishness so far in December as witnessed in recent trading sessions are part of stock market dynamism that often occurred in the first trading week of the last month of the year before the Santa Claus rally and other seasonality’s, which indicates that market rebound is underway as selloff in MTN Nigeria and reactions to the headlines about the omicron variant covid 19 subside from midweek losses, despite extending the negative outing in the week on a high traded volume and negative market breadth.
The strong Q3 earnings position and high cap stocks price movement that had supported the market uptrend and recovery are still there, meaning that end of the year price movement in stocks like Dangote Cement, BUA Cement, Airtel Africa and even FBNH. For one reason or the other, this will impact the market positively and push some medium and low cap stocks up to end this season higher as revealed by historical patterns and trends.
Market indexes remained on a selling pressure, confirming the high volatility and decline phase of the market cycle after breaking down the major support levels of 42,986.27 basis points on a very high traded volume and negative breadth. These have created opportunities for discerning investors and traders to buy in the dip, especially in companies that have consistent track record of dividend payment with strong fundamentals and growth prospects necessary to support further price increase and dividend payout.
Technically, the NGX index’s action is on the downtrend as selloffs persist on a slowdown, as momentum indicators for the day were mixed, with the ADX dropping to 47.76, RSI at 42.86 and Money Flow Index slide to 53.33 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds into the equity space as market open on Friday.
Meanwhile, Thursday’s trading opened on the downside, and pullbacks continued for the rest of the day on selloffs across sectors except for Consumer Goods, a situation that pushed the NGX index to an intraday low of 42,241.65 basis points from its highs of 42,465.57bps before closing below the opening points at 42,247.98bps.
Market technicals for the session were weak and mixed as volume traded was slightly lower than the previous day’s in the midst of negative breadth and ‘sell’ pressure as revealed by Investdata’s Sentiment Report showing 97% sell position and 3% buy volume. The total transaction volume index stood at 1.02 points, just as momentum behind the day’s performance remained relatively strong. Money Flow Index read 53.33 points, from the previous day’s 53.35 points, indicating that funds exited the market on selloffs.
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Index and Mkt Cap Movement
The composite index NGXASI at the end of Thursday’s trading shed 218.15basis points, at 42,247.98bps after opening at 42,463.38, representing a 0.51% decline, just as market capitalization fell by N112.27bn, closing at N22.04tr, from the opening value of N22.16tr, also representing 0.31% depreciation in value.
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The downturn was driven by selloffs in MTNN, Seplat, Zenith Bank, Oando, Access Bank , GTCO, Oando, GSK, ETI, BOCGAS, Stanbic IBTC and UBA, among others, which impacted negatively on Year-To-Date gain, reducing it to 4.91%. Market capitalization stood at N1.12tr YTD, representing a 4.71% growth from the year’s opening value.
Bearish Sector Indices
Sectoral performance indexes were bearish, except for the NGX Consumer Goods that closed 0.08% up, while the NGX Energy index led the decliners, losing 3.51%, followed by Insurance, Banking and Industrial goods, with 2.24%, 1.18%and 0.10% respectively.
Market breadth was negative as losers outnumbered gainers in the ratio of 33:17, while activities in volume and value terms were up after investors exchanged 324.02m shares worth N5.29bn, compared to the previous day’s 335.48m units valued at N3.55bn. Volume was boosted by trades in FBNH, GTCO, Access Bank, Transcorp and Zenirh Bank
The best-performing stocks for the session were Meyer and NEM Insurance which gained 10% and 7.33% respectively, closing at N0.22 and N2.05per share respectively onmarket forces. On the flip side, BOCGAS and Africa UPDCl lost 10% and 9.09% respectively, closing at N9.45 and N0.90 per share, purely on selloffs.
We expect a mixed trend as selloffs subside on assets rebalancing with seasonality and cycles likely to influence equity prices ahead of year-end window dressing. The high volume traded in the midst of pullbacks is creating new buy opportunities on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the session revealed that institutional players are not selling but positioning in blue-chip companies, as the index slide on a light volume. It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position. Even as many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield capable of serving as a hedge against inflation.
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