The Nigerian equity market recorded a mixed performance last week, closing north in three sessions and south for the rest of the two trading sessions. While there were positive movements in some parts of the market, the decline in the two down sessions was more intense, leading to a slide in both market capitalization and the benchmark All-Share Index by 0.20%, following which total capitalization closed at N58.92tr, and Index at 97,236.19 basis points.
The downward momentum was largely driven by fall in the share price of Oando, which experienced a significant sell-off amid investor concerns over its delayed 2023 audited financial results which was a mix-bag, a situation that also played out in subsequent Q1 and Q2 2024.
The uncertainty surrounding the company’s future performance as reflected in the notes accompanying note from the external auditors could have led to panic selling, as investors reacted negatively to the reported figures.
However, Investdata Consulting believes that long-term investors who see potential in the company despite the short-term volatility, took advantage of the price slash by employing a strategy known as Naira-cost averaging. This investment approach involves accumulating shares of a company when its price is low, with the hope of a rebound over time, allowing such investors book profit when the stock price eventually surges. Naira-cost averaging is a crucial principle for value investors looking to build long-term wealth by looking at the business model and capacity to grow in the future.
Oando Daily Chart
=
It is essential for investors to understand that market downturns are part of normal market dynamics and should not always be seen as a negative event. Instead, when the market trends downward, it can provide a good buying opportunities, especially for companies with strong fundamentals and growth potentials. Every investor must integrate both technical analysis and fundamental analysis into their decision-making process. Fundamental analysis helps determine whether a company is fundamentally sound and whether its stock is worth buying, while technical analysis provides insights into the right timing — i.e., when to enter or exit a position. Both the “what” and the “when” are essential to successful investing.
Leading the top gainers chart for the week under review was Eunisell, a stock worth N1.94bn in market capitalization, which has been on a strong upward trajectory for the past three weeks. Eunisell, which specializes in developing, manufacturing, and marketing polymeric, metallic, and porcelain products, saw its stock price surge by 45.91%, closing at N8.20 per unit. This rise reflects a positive investor sentiment toward the company’s business model and prospects.
Following closely was John Holt Plc, which surged by 45.76%, closing at N4.81; Conoil Plc also performed well, increasing by 37.35% during the week to close at N260 each. Similarly, Sovereign Trust Insurance saw an increase of 21.05% in its share price, closing at N0.69, while Consolidated Hallmark Holdings surged by 14.86%, closing at N1.70 per share. These positive movements highlight the potential for growth in the Nigerian equity market, particularly in sectors like energy, insurance, and manufacturing.
On the other hand, the decliners’ chart was led by Oando Plc, which shed 21.97% of its market capitalization at N869.6bn; Abbey Mortgage Bank fell by 18.15%, closing at N2.66, and Deap Capital, 14.40% at N1.07 per share. Tantalizers Plc also lost 12.50%, closing at N0.56, while Meyer Plc shed 9.98%, closing at N7.67. These declines highlight the risks associated with investing in companies with uncertain or poor financial results, as well as the broader volatility in the Nigerian stock market.
In terms of macroeconomic performance, Nigeria’s current account surplus rose significantly to $5.14bn (representing 11.46% of GDP) in Q2 2024, up from $3.38 billion (or 7.35% of GDP) in Q1. This increase was driven by a combination of lower import costs, strong remittance inflows, and a favorable trade balance. A trade surplus can be a positive indicator for a country’s economy, as it means the country is exporting more than it is importing, thereby boosting national income. The revenue generated from exports contributes to higher national GDP, providing a positive feedback loop for economic growth. If this surplus continues, it could help strengthen the Nigerian currency, the Naira, against other major currencies, improving the country’s external position and increasing investor confidence.
In the energy sector, Lagos State. Nigeria’s commercial and economic hub says it plans to develop a 4,000 megawatts gas-fired power plants to address the persistent electricity shortfalls in the region. Nigeria has long struggled with power supply issues, with over 40% of its population lacking access to reliable electricity, according to a World Bank report. This challenge has been a significant obstacle to attracting investment and driving economic growth. Lagos, with a population of over 20m people, requires at least 6,000MW of electricity from the national grid to meet its energy demands. The new gas plants are expected to go a long way in alleviating the power shortage, creating a more conducive environment for business activities, and potentially boosting economic growth in the region.
Technical Analysis: NGXASI Daily Chart
From a technical perspective, the Nigerian equity market has shown signs of recovery from previous declines, which reflects a strong level of investor confidence. The bullish momentum had been leading throughout the week before the bears took control during the later part of the trading sessions. The money flow reading of 28.86 indicates that funds have been leaving the market, likely due to portfolio reshuffling and rebalancing as investors prepare for a potential Santa Claus rally, a seasonal upward trend typically observed in stock markets towards the end of the year.
The Relative Strength Index (RSI) stands at 42.92, which suggests that the market is not yet oversold, but it is also not in overbought territory. If investor confidence continues to build, there is significant upside potential for the market as we approach the year-end. The RSI, when supported by strong fundamentals, can indicate a potential upward movement in stock prices, especially in light of the recovery seen in certain sectors. It is crucial for investors to continue monitoring the market closely, as this period of recovery could set the stage for strong performance in the final quarter of the year.
Take Action
Invest 2025 Traders & Investors Summit
Theme: Profit From 2025 Once-A-Decade Opportunities & Patterns
Sub-Topics
- Impact of the 2025 National Budget & Changing Government Policies On Investment Windows
- Opportunities In Fixed Income Market & 2025 Inflation Outlook
- Maximizing Returns In A “Year Ending In 5” Effect: Uncovering 10 Golden Stocks For Profitable Investing
- Real Estate Investment Opportunities in 2025 Amid Fiscal Policy Reforms.
- How To Navigate The Alternative Investment Markets To Grow Your Portfolio
- Building An All-Weather Portfolio To Stay Ahead Of NGX In 2025 & Beyond
- Profitable Chart Patterns & Timing To Trade “Year Ending In 5” Effect On NGX
- The Place Of Corporate Earnings In Trading & Investing For Retirement
2025 isn’t just any year, it is part of a powerful historical trend known as the ‘Year Ending in 5’ effect. This phenomenon proves to be one of the most consistent in any stock market and has been evident for decades. Years ending in 5 have delivered the highest average returns of any year in a decade. In fact, looking back over the last century, stock market during these years have consistently outperformed others, often by a significant margin.
If you want to be prepared for this rare opportunity, the time to take action is now.
Take-away from this summit will include:
How to construct a resilient and Powerful Portfolio that adapts to market changes.
- What to expect from the market and economy in 2025, based on 10-year cycle.
- Why 2025 is a statistically extraordinary year, for reasons that only happen once every decade.
- How to anticipate big sector moves in 2025
- Understanding the cycle of 10 years opportunities time frames that is about to start!
- 10 golden stocks for 2025
Date: December 7, 2024
Fee: 60k
Venue: Zoom
If you want to be among successful investors and traders in 2025, send Yes to: 08028164085, 08179547605 now.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
