Expect Positioning, Profit Taking, Amid Portfolio Realignments, Impressive Earnings
Market Update for February 9
The seesaw movement resurfaced on the Nigerian Exchange on Thursday as the benchmark NGX All-Share index side trended to close marginally lower on profit booking ahead of next week’s macroeconomic data from the National Bureau of Statistics and corporate earnings reports hitting the market. This is in the midst of volatility and increasing electioneering activities as Nigerian voter’s countdown to February 25 for presidential and national assembly election.
It was a mixed session of low traded volume and negative market breadth, as the previous day’s gain was halted on portfolio repositioning and selloffs in the face of market players digesting the outcome of the last Treasury Bills primary market auction rates. The market witnessed further rates decline to 0.10%, 0.30% and 2.24% respectively for 91days, 182days and 364 days’ tenors in the midst of high inflation of 21.34%, just as January consumer price index report is expected to hit the market next week.
Despite the ranging market and profit taking, Thursday’s trading, sustained its strong momentum, in the midst of NGX index action forming a top pattern reversal chart that needs confirmation at the opening of Friday trading. On the strength of the expected early filers and others, this uptrend should be sustaining in the near term and correct during post earnings season before the governorship election or after due to price adjustment for dividend declared. Also, there is the anxiety over the outcome of the Presidential elections scheduled for February 25.
Selling sentiments across the major sectors of the market, except for industrial goods that closed flat, as the primary trend remain bullish as revealed in the short and medium-term trends. Friday’s trading metrics will give a clear direction as more companies release their scorecards, just as it may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the coming 2023 general elections.
Technically, the NGX index’s action has signaled a distribution phase which support pullback after forming a bullish V-shape pattern that indicates reversal or continuation of trend on a daily and weekly time frame. Just as there is a divergence between the index action and MACD on a dally chart that supports downtrend, due to profit taking in blue chip stocks. Let us keep our gaze on market forces and money flow.
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Oil price oscillation continued slipping to $84.40 per barrel, on production surge in the midst of rising demand of Chinese as their economic recovery. Just as the geopolitical tension, high interest rate and inflation across the globe continue to threaten the world. Also, supply tightened due to the Russia-Ukraine war that has lingered so far. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, Thursday’s trading opened slightly in the downside and it was sustained for the session, despite oscillating on profit taking and demand for some stocks, a situation that pushed the NGX’s index to an intraday low of 54,358.20 basis points from its highs of 54,429.93bps, before closing marginally below its opening points at 54,359.90bps.
Market technicals were negative and mixed, with higher volume of trade, compared to the previous session in the midst of breadth favoring bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 2% buy position and 98% sell volume. The total transaction volume index stood at 0.69 points, just as momentum behind the day’s performance was strong as Money Flow Index looked up at 83.17pts, from the previous day’s 80.06pts, indicating that funds entered the market, despite closing lower.
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Index and Market Caps
At the end of the session, the composite NGX All Share index fell by 67.15 basis points, closing at 54,359.90bps, after opening at 54,427.05bps, representing a 0.12% drop, just as market capitalization fell by N36.58bn closing at N29.61tr from the previous day’s N29.64r, which also represented a 0.12% value loss.
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Thursday’s downturn was driven by selloffs and profit taking in the shares of Geregu Power, GSK, TOTAL, NGXGROUP, Fidelity Bank, NB, Mansard and Wapic Insurance among others, which impacted mildly on Year-To-Date gain to reduce 6.07%. Market capitalization YTD gain at N1.77tr, representing 6.07% above its opening level for the year.
Bearish Sector Indices
Sectorial performance indexes for the session were down, as the NGX Industrial goods closed flat, while NGX Insurance led the decliners after losing 1.45%. followed by Energy, Banking and Consumer goods with 0.61%, 0.38% and 0.30% respectively.
Market breadth was slightly negative as losers outnumbered gainers in the ratio of 17:16, while activities in volume and value were up, with investors exchanging 222.58m shares worth N3.04bn. Volume was driven by trades in Universal Insurance, GTCO, Sterling Bank, Aiico and FBNH,
NNFM and Redstar Express were best performing stocks after gaining 9.74% and 9.49% respectively, closing at N10.70 and N2.77per share respectively on market forces and earnings expectation. On the flip side, GSK and VeritaKap lost 7.91% and 4.76% respectively, closing at N6.40 and N0.20per share, purely on selloffs and profit taking.
We expect positive sentiments and trend to continue on positioning and profit taking as portfolio rebalancing in the midst of impressive corporate earnings and outcome of NTB auction, as rates fell further, amidst the release of more audited earnings and anxiety over the election uncertainty. Any pullback at this point may add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
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