Mixed Sentiment May Linger On Profit Taking Ahead Of Year-end Portfolio Realignment

Market Update for December 4

The first full trading week of December started on a mixed session of buying interests and selloffs in some highly priced stocks that pulled the benchmark NGX All-Share index lower, after testing a new all-time high of 71,607.90 basis points. Thereafter, it pulled back on profit taking in the midst of low traded volume and positive market breadth, halting three consecutive sessions of bull transition.
The market witnessed a selling sentiment in the face of index consolidation and side trending amid bullish and positive momentum on the NGX that reflects a disconnection from the gloomy economic situation of the country as headwinds continue to increase. There is also the mixed outlook for the last month of the year 2023, and Q1 2024 due to the current policy direction of the Central Bank of Nigeria (CBN). Also, how the government hopes to implement the 2024 national budget grow Nigeria into a US$1tr economy remains a source of concern to market players. We however hope that managers of the economy will formulate the right policies to achieve the expectation, while ensuring fiscal responsibility and maintaining a frugal disposition, a wide departure from the current norm. Already, we note that there is already a divergence in economic manager’s policies and its expectation. We hope to see how the government and its economic managers will grow the Nigerian economy by an ambitious 16% yearly over the next seven years to achieve the $1tr target as argued by Uwaleke, a professor of Capital Market Studies at the Nasarawa State University at the weekend in Lagos.
Also, we believe that the policy tightening disposition of the CBN at this time could result in an unintended economic contraction in an environment where growth is already weak and fragile, with high cost of funds further pushing cost of production and services higher, driving prices northward. This is made worse by imported inflation due to the lingering foreign exchange challenges, among others.
The two consecutive quarters of rate hikes, as well as the proposed fresh round of bank recapitalization are expected to drive the much desired economic development in the face of a significant devaluation of the Naira, just as the surging inflation is bound to drive mixed outlook in the market and economy in the first half of 2024.
Already, profit taking and selloffs resurfaced in the market, despite the positive advancers/decliners line, amid selloffs in BUA Cement and others that weighed on the market on Monday. The divergence between MACD and index action continued in the midst of low traded volume ahead of the year-end seasonality. There is also the dividend season in Q1 2024, while all eye are fixed on the Santa Claus rally, year-end window dressing and 2023 audited full-year earnings reporting season which kicks off in January. A glimpse into what we should expect at year end has been provided by the unaudited Q3 corporate earnings reports released by listed companies.
The NGX index pulling back to trade below the T-Line and 71,000 psychological line, calls for cautious start for the new week following the strong gains recorded in the previous months. Traders need to watch out as the market enters its distribution phase amidst the high volatility as they await events like the TB primary market auction, consumer price index for November and others, even as hedging against the rising inflation and market downturn continued. At this point, correction will create another entry opportunity for discerning market players, as the market looks to earnings season in January.
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Oil price oscillation continued, as it pulled back to trade below $80 at $77.98 per barrel in the midst of latest OPEC cuts leaving it to fewer option, red sea strikes and low manufacturing activities in the second largest economy of the world. Even as middle east conflict is taking another dimension. As rate hike pause by some of the central banks due to cooling inflation continue ahead of December policy meeting. The influence of demand and supply oil are worsened by the geopolitical tensions rising across the globe at a time the Russia-Ukraine war gradually approaches its third year. The war remains a major cause for concern with much more at stake than previously thought. The supply tightening due to the Russia-Ukraine war will propel the up and down movement in oil price, which also drive market volatility across the globe.
Monday’s trading started in the green and was sustained till early afternoon, despite oscillating before a pullback on profit taking in large cap stocks, a situation that pushed the Index to an intraday low of 70,941.82bps from its highs of 71,607.91bps, before closing below its opening level at 70,946.83bps.
Market technicals were negative and mixed with a lower volume traded, when compared to the previous session, in the midst of breadth favoring the bulls 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 0.80 points, just as the energy behind the day’s performance was strong, with Money Flow Index looking down to read 74.36pts, from the previous day’s 74.78pts, indicating that funds left the market.
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Index and Market Caps
At the close of the day trading, the composite NGX All-Share Index shed 473.04bps, closing at 79,946.83bps, from the 71,419.87bps opening level, representing a 0.66% decline. Market capitalization fell by N258.85bn, closing at N38.82tr, from the previous day’s N39.08tr, which also represented a 0.66% depreciation in value.

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Meanwhile, the downturn was driven by selloffs and profit taking in the shares of BUA Cement, NGXGroup, Oando, Dangote Sugar, Wapco, UBA, May & Baker and Axa Mansard, among others. This impacted negatively on Year-To-Date gain, as it reduced to 38.43%, while Market Capitalization YTD gain stood at N10.56tr, representing a 39.21% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Consumer goods and Banking index closed marginally higher by 0.06% and 0.01% respectively, while the NGX Industrial goods led the decliners after gaining 4.21%, followed by Insurance and Energy with 0.28% and 0.01% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 33:25, while activities in volume and value terms were mixed, after players exchanged 358.53m shares worth N7.10bn, driven by trades in Universal Insurance, Transcorp, GTCO, Unity Bank and UBA.
Thomas Wyatt and FBN Holdings were the best performing stocks, gaining 10% and 9.93%, closing atN2.75per and N24.35 share respectively, on market sentiment and forces. On the flip side, BUA Cement and CWG lost 10% and 7.50%, closing at N93.60 and N6.66 per share, purely on the back of profit taking and selloffs.

Market Outlook
We expect mixed sentiment and performance to continue on buying interest and profit taking ahead of year end in the midst of sector rotation and portfolio rebalancing on the strength of the better-than-expected corporate numbers released and high yields. However, we note that 2024 is beginning dividend season ahead.
Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.

The management of Investdata Consulting uses this medium to appreciate all who participated in the Invest 2024 Summit, including our esteemed facilitators who were on hand to share their valued experiences garnered over the years.
While we appreciate those who joined us for the first time as we seek to create and grow wealth for discerning investors, we are grateful to all who have stood by us over the years and keep returning. May God bless you all, even as we pray that you continue to find value in this relationship that we cannot take for granted

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605

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