Market Update for February 25

Bearish sentiments continued on the Nigerian Exchange continued Tuesday, with the benchmark NGX All-Share index closing lower again for the fourth successive session, breaking down the psychological line of 108,000 basis points on a low traded volume and negative market internals. This wads in the midst of a downturn, the earnings reporting season and ongoing portfolio rebalancing across the financial market, driven by declining yields in the fixed income market. These is also the anticipated rate cut by the Central Bank of Nigeria (CBN), after the recent pause at its policy committee meeting.

However, despite the recent pullbacks or free fall, the NGX remains up on previous gains recording month to date returns of 3.14%, even as the YTD closed in green of 4.72%.

The selloffs and volatility on the exchange create opportunities to buy into value stocks in the midst of portfolio realignment, as all eyes are on expected full-year audited financials which will continue to guide buying and money flow into the market.  The ongoing profit taking across the major sectors of the market supports dividend income positioning.

This downtrend in the phase of the market is a sign that players are searching for value in stocks that suffered pullbacks recently with higher yields and the once which are yet to rally, as assets repriceing and valuation reveal opportunities inherent in the different stocks and sectors.

This wave of profit taking and corrections are short-term realities of any market across the globe that are driven by market dynamics in repositioning and preparation for more audited scorecards and dividend expectation this season. Importantly also at this period are dividend payout and yields which remain very important to players at a time like this, when prices are looking down. Knowing that different phases of the market comes with its own opportunities and benefits, especially with reactions to earnings as market players are digesting corporate  numbers and rate direction of the apex bank after the last policy meeting.

At the current phase of the NGX, investors should target dividend paying companies, defensive stocks as pullbacks will impact dividend yields positively and provide room for higher upside that support capital gain. This is due to market had entered overbought region that signal  price adjustment and correction  in the midst of  selling sentiments for some sectors, consolidation moves in some industries and expectations of positive corporate numbers from some others, based on their quarterly and full year unaudited performance, coupled with their  dividend payouts history.

Technically, money flow and other momentum tools were down on Tuesday, revealing weakness and  present opportunities of buying low and selling high in the midst ongoing volatility and mixed sentiment. The index inched down to signal caution thereby creating the perfect setup for high probability of continuation to catch dividend season repositioning at the right price. Also, as the index trades below the T-line and above the two moving averages of 50-EMA and 50-SMA, this indicates relatively strength in the face of changing market fundamentals and technicals on the NGX and the economy.

NGX index action is on a decline phase in the midst of selling sentiment, as revealed by candlestick formation and momentum indicators. As ADX inched down to read 45.72points, while RSI and Money Flow Index were down at 63.16 and 59.51 points against the previous session’s 66.43 and 68.96 points respectively. Consequently, market players should watch this current trend and trade wisely in the face of funds leaving the market on a mixed sentiment in some sectors and profit taking in others on a daily time frame. Also, trading volume pattern continued to oscillates, suggesting smart money are locking in traders into bad position amid players revaluing the market and short term opportunities, looking at economic events in the face of policy direction of the government that look inconsistent and global economic outlook in the face of trade war tension.

To navigate the rest of Q1 and beyond profitably, it is important to run with economic events, fundamental and technical analysis, join investdata live sessions at noon every Monday, Wednesday and Friday’s trading session “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 pullbacks. Despite the oscillating volume of transaction witnessed in recent time, it is time to position in undervalued stocks, sectors and the next insider playing opportunity.

Oil prices on Tuesday inched lower to continue its oscillation, as it trades at $73.19 per barrel in the midst of US inventory drop and US-Russia talk on Ukraine settlement. As US economy is cooling ahead of inflation fear. Even as OPEC delay production cut to April 2025. As all eyes are on US President Policy uncertainty continued to drive volatility.  The geopolitical tension across many economies remains a concern to the global economy and energy consumption in 2025. This trend may likely continue, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Tuesday’s trading started on the downside and was sustained throughout the session on profit taking across mid to high cap stocks. The situation pushed the NGX’s index to an intra-day low of 107,778.30bps from its highs of 108,127.60bps, before closing below its opening level at 107,781.60bps.

Market technicals were negative and mixed with higher volume when compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 1% buy position and 99% sell volume. The total transaction volume index stood at 0.74points, just as energy behind the day’s performance was relatively strong as Money Flow Index inched lower to read 59.51pts, from the previous day’s 68.96pts, indicating that funds left the market.

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Index and Market Caps

At the end of the trading, the benchmark  NGX All-Share Index lost  345.36 basis points, closing at 107,781.61bps from 108,126.97bps, representing a 0.32% decline, while market capitalization fell by N215.12bn, at N67.17r from the previous day’s N67.38tr, representing a 0.32% value loss.

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Meanwhile, the downturn was driven by profit taking and selloffs in the shares of Oando, GTCO, Accesscorp, Zenith Bank, Julius Berger, Mansard, FCMB, Wapco and Wema Bank, among others. This impacted negatively on Year-To-Date gain that inched lower to 4.72%, while Market capitalization gain stood at N5.32tr, representing 7.02% increase over its opening level for the year.

Bearish Sector Indices

Sectoral performance indexes were in red, led by NGX Insurance index after losing 3.52%, followed by Energy, Banking, Consumer and Industrial goods with 1.04%, 0.56%, 0.22% and 0.02% respectively.

Market breadth was negative, as losers outnumbered gainers in the ratio of 48:13, while activities in volume and value were up after investors exchanged 363.01 million shares worth N10.12bn. Volume was driven by trades in Accesscorp, Jaiz Bank, Zenith Bank, Mansard and Guinness.

The NGX Group and Redstar Express were the best performing stocks, gaining 9.97% and 9.57% respectively, closing at N32.00 and N7.33 per share respectively on the back of sentiment and market forces. On the flip side, Honeywell Flour and Morison Industry lost 10% and 9.97%, closing at N11.25 and N3.25per share, purely on profit taking and selloffs.

Market Outlook

We expect recovery and slowdown of profit booking, as portfolio reshuffling continue on expectation of more earnings reports to hit the market with dividend announcement. Also, sector rotation and portfolio rebalancing continued in the market with investors taking advantage of price correction to buy into value.

This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

08028164085