Market Update for February 6

It was a mixed session on the Nigerian Exchange on Thursday, amid sustained positioning in value stocks in the face of profit taking in some other stocks that rallied recently on market reactions to impressive corporate earnings, which had extended the bull transition for the fourth successive trading session. Dividend declaration continued even as funds enter the equity space as revealed by Money Flow Index and other momentum indicators. Any pullback or correction at this point will create entrance for new trades for discerning investors and smart traders, as the market gives signs of topping, especially as the NGX enters the peak of earnings reporting season that comes with rewards.

The market is set for a breakout or reversal in the face of the ongoing volatility due to rotation on the strength of companies and sector performance with focus on low valuation and growth opportunities inherent in the different stocks and industries. During the session, Guinea Insurance, Deap Capital and Universal Insurance presented their unaudited accounts to the market, with numbers looking good. Dangote Sugar informed the NGX of the board meeting to approve its audited financial statement for the year ended December 31, 2024, just as Fidelity Bank updated the market of its EGM resolutions.

The recent corporate numbers have offered insights into what dividends some of the companies that have so far submitted their unaudited financial report for the 2024 full-year will look like on the strength of their earnings power and based on their dividend policy.

The mixed macroeconomic data and expected economic events would shape market sentiments for companies with December year-end. NGX waves and uptrend are portfolio rebalancing-driven, in addition to profit taking in preparation for more scorecards inflow and dividend expectation in Q1 which is the peak of the earnings reporting season on the NGX. Also, dividend yields remain very important to players at a time like this, by relating price with expected payout of the companies.

The index’s action has extended its markup phase on a less than average traded volume and positive market internals that revealed the entrance of smart money that supports continuation of trend or profit taking which needs confirmation. 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 numbers and making their decisions. Investors and traders should look the way of high yield dividend paying companies and growth stocks with higher upside potentials as a number of companies are hitting new 52-week highs. This is due to positive 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 up, presenting buy opportunities for traders who understand the importance of buying low and selling high in any market condition in the midst ongoing volatility and buying sentiment. As the index inched up to signal buy opportunities, thereby creating the perfect setup for high probability of continuation to catch dividend season repositioning at the right price. Also, as the index trades above the T-line and the two moving averages of 50-EMA and 50-SMA, this indicates strength in the midst of changing market fundamentals and technicals on the NGX and the economy.

Also, the NGX is heading to strong resistance level of 105,556.70 on a mixed sentiment, as candlestick formation and momentum indicators reveal strength in the market. Just as ADX is inched up to read 29.54 points, while RSI and Money Flow Index were up at 67.49 and 78.03 points against the previous session’s 66.93 and 71.88 points respectively. Consequently, market players should watch this current trend and trade wisely in the face of funds entering the market on a buying sentiment in some sectors and position taking in others on a daily time frame. Also, trading volume pattern continued to oscillates, suggesting smart money are making effort to markup prices in the market 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 Thursday inched up to continue its oscillation, trading at $75.22 per barrel in the midst of pressure from trade war fears and US increasing crude inventory. As OPEC delay production cut to April 2025. Despite the ongoing tariffs driven trade war. Looking at the ceasefire deal in the Middle East, while Russia and Ukraine war continue. As all eyes are on the trade war.  The geopolitical uncertainties 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.

Thursday’s trading started in the green and it was sustained throughout the session, despite oscillating on positioning and profit taking across the low, medium and high cap stocks. This situation pushed the NGX’s index to an intra-day high of 105,531.60bps from its lows of 105,324.90bps, before closing above its opening level at 105,430.09bps.

Market technicals were strong and mixed with lower volume when compared to the previous session in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 51% buy position and 49% sell volume. The total transaction volume index stood at 0.93 points, just as momentum behind the day’s performance was  strong as Money Flow Index inched up to read 78.03pts, from the previous day’s 71.88pts, indicating that funds entered  the market.

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Index and Market Caps

At the close of trading, the composite NGX All-Share Index inched up by 105.26 basis points, closing at 105,430.15bps from 105,324.89bps, representing a 0.10% up, while market capitalization rose by N65.19bn, at N65.29r from the previous day’s N65.22tr, representing a 0.10% value gain.

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Meanwhile, the session’s upturn was driven by positioning in the shares of Eterna, Cadbury, GTCO, Accesscorp, CWG, Sky view Aviation, UPDC and Fidson, among others. This impacted mildly on Year-To-Date gain that inched up to 2.43%, while Market capitalization gain stood at N2.74tr, representing 4.02% increase over its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were in green, led NGX Insurance index after gaining 0.63%% followed by Consumer goods, Energy, Banking and Industrial goods with 0.18%, 0.13%, 0.09% and 0.04% respectively.

Market breadth was positive, as gainers outnumbered losers in the ratio of 33:22, while activities in volume and value were down after investors exchanged 537.19 million shares worth N23.03bn. Volume was driven by trades in Accesscorp, SterlingNG, Zenith Bank, FBNH and UPDC.

Eterna and Cadbury were the best performing stocks, gaining 9.88% each, closing at N33.35 and N26.70 per share respectively on the back of sentiment and market forces respectively. On the flip side, Tripple Gee and Golden Breweries lost 9.72% and 8.91% respectively, closing at N2.23 and N7.87per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiments to continue on profit taking and repositioning on strength of corporate numbers, 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