Expect Slowdown In Selloffs, As Seasonality Sway Prices Ahead Of Year-End
Update for December 1
The NGX benchmark index at the midweek finished lower, reversing the trend and breaking down the strong support of 43,000 basis points and 42,964.24 points on selloffs and profit-taking in telecom giant MTN Nigeria whose offer for sale of 575 million shares opened during the session at N169. Also, the market also reacted to news of the COVID-19 omicron variant case in the country, just as volatility increased on the Nigerian Exchange.
The NGX and sectorial indexes sold off on an increased level of volatility that confirmed the decline phase of the market after breaking down the major support level of 42,986.27 points on a very high traded volume and negative breadth. This, nonetheless, is creating opportunities for discerning investors and traders to buy in the dip, especially in companies with a consistent track record of dividend payment, strong fundamentals, and growth prospects that will support further price increase and payout.
Technically, the NGX index’s action is correcting in the face of selloffs and portfolio repositioning, after it slipped southward as revealed by momentum indicators for the day which was mixed and down, while the ADX dropped to 50, RSI at 43.61 and Money Flow Index fell to 53.25 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and inflow of funds to as trading opens on Thursday.
Midweek’s trading started slightly in the green, before pulling back for the rest of the session on selloffs across the sectors except for insurance, a situation that pushed the NGX index to an intraday low of 42,463.36 basis points from its highs of 43,248.30bps before closing sharply below the opening points at 42,463.36bps.
Meanwhile, market technicals were weak and mixed as volume traded was higher than the previous day’s in the midst of breadth that favoured the bears on a negative sentiment as revealed by Investdata’s Sentiment Report showing 100% sell position. The total transaction volume index stood at 1.06 points, just as momentum behind the day’s performance remained relatively strong. Money Flow Index read 53.35 points, from the previous day’s 55.73 points, indicating that funds exited the market on profit-taking and selloffs.
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Index and Mkt Cap Movement
At the close of Wednesday’s trading, the key performance NGXASI was down by 885.05 basis points, at 42,463.38bps after opening at 43,248.30, representing a 1.81% decline, just as market capitalization fell by N409.56bn, closing at N22.16tr, from the opening value of N22.57tr, also representing 1.81% value loss.
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The downturn was driven by selloffs in MTNN, Flour Mills, Oando, Access Bank, GTCO, and UBA, among others, which impacted negatively on Year-To-Date gain, reducing it to 5.44%. Market capitalization stood at N1.12tr YTD, representing a 5.22% growth from the year’s opening value.
Bearish Sector Indices
Sectoral performance indexes were bearish, except for the NGX Insurance that closed 0.77% higher, while the NGX Banking index led the decliners, losing 1.15%, followed by Consumer Goods, Industrial goods, and Oil/Gas, with 0.14%, 0.14%and 0.12% respectively.
Market breadth was negative as losers outnumbered gainers in the ratio of 23:15, while activities in volume and value terms were up after investors exchanged 335.48m shares worth N3.55bn, compared to the previous day’s 224.911m units valued at N2.08bn. Volume was boosted by trades in FBNH, Universal Insurance, Zenith Bank, GTCO, and Transcorp.
Cornerstone Insurance and Mansard Insurance were the best-performing stocks, gaining 7.69% and 7.53% respectively, closing at N0.56 and N2.28per share respectively on low price attraction and market forces. On the flip side, MTNN and Africa Prudential lost 10% and 7.69% respectively, closing at N171.00 and N6 per share, purely on selloffs and profit-taking.
Market Outlook
We expect a slowdown in selloffs and decline, with seasonality and cycles likely to influence equity prices ahead of year-end window dressing. The low 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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