Market Update for February 19

Trading activities of the Nigerian Exchange rebounded at midweek in the face of mixed session and movement of key performance indicators of the market as revealed by the benchmark NGX All-Share Index which closed higher than the market cap. This was due to cancellation of 166,948,153m ordinary shares of Dangote Cement Plc during the session as part of the share buy-back programme. The renewed buying interest across some major sectors of the market supported the index positively on a low traded volume and negative market internals.

The Treasury bill primary market auction rates continued to decline across all the tenors in the latest auction to 17%, 18% and 18.43% respectively for 91-day, 182-day and 364-day ahead of CBN policy meeting outcome where inflation rate seem to be on southward movement as a result of the rebased in January consumer price index that reads 24.5% from 34.84% in December 2024. This is likely to trigger circular flow of funds to the equity space in the short term as NGX earnings reporting season had entered its peak with expectation of more audited corporate earnings and dividend announcements. More liquidity flowing into the stock market is a strong fundamental that will support prices to move up, if the numbers beat expectations.  Any hold or rate cut decision at the end of MPC meeting today will be a plus for the stock market, while another rate hike will deflate sentiment for equity.

The buying sentiment and rebound on the NGX creates opportunity to position in value stocks in the midst of the earnings season and expected full-year audited accounts which will continue to guide buying and money flow into the market. Profit taking in banking stocks and others supports dividend income positioning in that sector. This uptrend in the face of volatility was as a result of portfolio realignment and players searching value in stocks that are yet to rally, by focusing on low valuation and growth opportunities inherent in the different stocks and industries.

The NGX’s waves and correction re short-term trade profit taking-driven in addition to positioning in preparation for more audited scorecards inflow and dividend expectation this season. Importantly also, dividend payout and yields remain very important to players at a time like this, when there is over-subscription in TB auction and rates are declining in recent time. Knowing that one day does not change a trend and it does not change outlook especially with reactions to earnings as market players are digesting these impressive numbers and making their decisions.

Investors should target dividend paying companies, 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, 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 still trades above the T-line and 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.

The NGX entered accumulation and markup phase in the face of buying sentiment, as revealed by candlestick formation and momentum indicators. As ADX was up to read 43.46points, while RSI and Money Flow Index were mixed at 71.13 and 66.99 points against the previous session’s 67.41 and 67.57 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 at midweek inched higher to continue its oscillation, as it trades at $76.87 per barrel in the midst of expected peace talk Russia and Ukraine, increasing US stockpile and trade war dampening sentiment in commodity market. Even as OPEC delay production cut to April 2025. Looking at the ceasefire deal in the Middle East, while Russia and Ukraine war continue. 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.

Meanwhile, trading during the session opened slightly in the upside and was sustained throughout, despite oscillating on position taking in BUA Foods and others. The situation pushed the NGX’s index to an intra-day high of 108,718.00bps from its lows of 107,614.00bps, before closing sharply above its opening level at 108,610.00bps.

Market technicals were positive and mixed with lower volume when compared to the previous session in the midst of breadth favoring the bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 90% buy position and 10% sell volume. The total transaction volume index stood at 0.67points, just as impetus behind the day’s performance was strong as Money Flow Index inched lower to read 66.99pts, from the previous day’s 67.57pts, indicating that funds entered the market, despite closing higher.

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Index and Market Caps

The NGXASI gained 938.53 basis points, closing at 108,610.00bps from 107,671.00bps, representing a 0.87% growth, while market capitalization rose by N504bn, at N67.68r from the previous day’s N67.18tr, representing a 0.75% in value gain. The divergence was as mentioned above.

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The session upturn was driven by buying interest and position taking in the shares of BUA Foods, Eterna, Honeywell, Sunu Assurance, C/I Leasing and RT Briscoe, among others. This impacted positively on Year-To-Date gain that inched higher to 5.52%, while Market capitalization gain stood at N5.89tr, representing 7.77% increase over its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were mixed, as the NGX Consumer goods, Insurance and Energy indexes closed higher by 4.16%, 0.295 and 0.03% respectively while the NGX Banking index was in red and NGX Industrial goods finished flat.

Market breadth was negative, as losers outnumbered gainers in the ratio of 27:25, while activities in volume and value were down after investors exchanged 343.72 million shares worth N8.63bn. Volume was driven by trades in Accesscorp, Fidelity Bank, Zenith Bank, SterlingNG and Wapic.

BUA Foods and RT Briscoe were the best performing stocks, gaining 9.91% and 6.91% respectively, closing at N410.50 and N2.63 per share respectively on the back of sentiment and market forces. On the flip side, University Press and IEI lost 9.80% and 9.80%, closing at N4.60 and N2.21per share, purely on selloffs and profit taking.

Market Outlook

We expect positive sentiment, as all eyes are on MPC meeting outcome, even as portfolio reshuffling continue on buying sentiment, while more earnings are expected 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