Market Update for February 24

Selling pressure in some  mid to highly capitalized stocks on the Nigerian Exchange continued to weigh on the benchmark NGX All-Share index negatively as the last trading week of February started in the red. This extended the bear transition for a third consecutive session on a selling sentiment, low traded volume and negative market breadth in the face of decline in fixed income market yields and ongoing earnings reporting season.

The pullbacks and volatility on the exchange creates opportunities to buy into value stocks in the midst of portfolio realignment, as a result of the recent pause in rate hike by the monetary authorities while 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 in banking stocks and others supports dividend income positioning in that sector. This downtrend in the face of market players searching for value in stocks that pulled back recently and the once which are yet to rally, as assets repriceing and valuation reveal opportunities inherent in the different stocks and sectors.

These waves of profit taking and corrections are short term realities 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 there is over-subscription in TB auction and rates are declining in recent time. 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, 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.

NGX index action slipped into the decline phase in the midst of selling sentiments, as revealed by candlestick formation and momentum indicators. As ADX inched up to read 45.98points, while RSI and Money Flow Index were down at 66.43 and 68.96 points against the previous session’s 70.06 and 74.70 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 Monday inched lower to continue its oscillation, as it trades at $74.24 per barrel in the midst of calm in Middle East and peace talk in Ukraine ahead of Kurdistan resuming oil export. As US economy slows down 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.

Meanwhile, Monday’s trading opened slightly in the upside before pulling back in the afternoon session on profit taking across all classes of stocks. The situation pushed the NGX’s index to an intra-day low of 108,089.70bps from its highs of 108,605.60bps, before closing below its opening level at 108,127.00bps.

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 7% buy position and 93% sell volume. The total transaction volume index stood at 0.72points, just as energy behind the day’s performance was strong as Money Flow Index inched lower to read 68.96pts, from the previous day’s 74.42pts, indicating that funds left the market.

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Index and Market Caps

The composite NGX All-Share Index, at the end of Monday shed 370.43 basis points, closing at 108,126.97bps from 108,497.40bps, representing a 0.34% decline, while market capitalization fell by N230bn, at N67.38r from the previous day’s N67.61tr, representing a 0.34% depreciation in value.

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To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling, and repositioning as we await an economic reform policy that can stimulate and re-track the economy to the path of growth and development.

The downturn was driven by profit taking and selloffs in the shares of NNFM, GTCO, Accesscorp, Zenith Bank, CWG, Mansard and UPDC, among others. This impacted negatively on Year-To-Date gain that inched lower to 4.38%, while Market capitalization gain stood at N5.54tr, representing 7.36% increase over its opening level for the year.

Bearish Sector Indices

Sectoral performance indexes were down,  led by NGX Banking index after losing 1.44%, followed by Insurance, Energy, Consumer and Industrial goods with 0.86%, 0.27%, 0.15% and 0.07% respectively.

Market breadth was negative, as losers outnumbered gainers in the ratio of 37:17, while activities in volume and value were up after investors exchanged 357.76 million shares worth N9.21bn. Volume was driven by trades in Jaiz Bank, Zenith Bank, Universal Insurance, GTCO and Accesscorp.

Ikeja Hotel and PZ were the best performing stocks, gaining 10% and 9.26% respectively, closing at N12.10 and N29.50 per share respectively on the back of sentiment and market forces. On the flip side, NNFM and Eunisell lost 9.99% and 9.96%, closing at N72.55 and N10.85per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiment, as portfolio reshuffling continue on profit taking.  As 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