Market Update for January 28

Profit booking resurfaced on the Nigerian Exchange on Tuesday, following selloffs activities in some low, medium and large cap stocks that rallied recently in the midst portfolio rebalancing and more earnings reports hitting the market with surprising numbers, despite few companies that had reported earnings below market expectations.

The composite NGX All-Share index, therefore, closed lower, halting the previous gain on an above average traded volume in the face of negative market internals and selling sentiment, just as more quarterly and full year unaudited scorecards were released to the market from CAP, Aradel Holdings, NEM Insurance, Abbey Mortgage Bank, LivingTrust Mortgage Bank,Ikeja Hotel, NCR, Morison Industries and Veritas Kapital Assurance.

The numbers were impressive and signaled a hold, offering an insight into what market players should expect at the end of their financial year end. However, it is noteworthy that Aradel, NEM, CAP, Ikeja Hotel and the mortgage banks performance for the Q4 and full year unaudited, beat expectation and give investors hope to hold their positions ahead of their dividend announcements and Q1 numbers for the new financial year.  However, the scorecards of NCR, Morison and Veritas were below expectation and poor, as some posted negative earnings for the period.

The pullback in the face of distribution phase and earnings reporting season signaled sector rotation and rebalancing of portfolios ahead of more corporate earnings. The numbers released so far look good and are capable of supporting prices and attracting inflow to the market. The persisting low valuation creates opportunities for market players to buy into value and reposition for dividend income.

Already, this season is giving insights into what dividends will look like on the strength of their numbers released so far. Volatility may continue as the earnings season progresses, just as the mixed macroeconomic data and expected economic events would shape market sentiments for companies with December year-end. The ongoing waves in the NGX are portfolio rebalancing-driven, just as 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 yield remains very important to players.

The NGX’s All-Share index pullback supports an uptrend, because one day does not change a trend and it does not change outlook especially with reactions to earnings as market players digesting these numbers. 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 performance and history of dividend payouts. During the session, companies like Chams, Cutix, Oando and  ABC Transport notified the investing public of their board meetings.

Technically, money flow and other momentum tools were mixed, 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 selling sentiment. As the index pulled back 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 some strength in the midst of changing market fundamentals and technicals on the NGX and the economy.

Also the NGX is currently in its distribution phase in the midst of increasing traded volume, as candlestick formation and momentum indicators reveal somewhat correction in the market. ADX is looking down to read 33.18 points, while RSI and Money Flow Index were mixed at 60.56 and 63.42 points against the previous session’s 64.50 and 58.48 points respectively. Consequently, market players should watch this current trend and trade wisely in the face of funds entered the market on a selling sentiment in some sectors and position taking in others on a daily time frame. Also, trading volume pattern continued to oscillates, suggesting wait and see in the market amid players revaluing the market and economic events in the face of policy direction of the government that look inconsistent.

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 Tuesday inched up and continued its oscillation, trading at $77.53 per barrel in the midst of increased US crude production and easing geopolitical tensions. Even as tariff threats remained unsettled. OPEC project robust demand for oil in 2025 and 2026 in the face of ceasefire deal in the Middle East, while Russia and Ukraine war continue. As all eyes are on new tariff regime of Trump presidency.  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.

Meanwhile, Tuesday’s trading started slightly in the upside before pulling back in the midday to afternoon session and it was sustained for the rest of the day, despite oscillating on profit taking in high cap stocks and positioning in others. This situation pushed the NGX’s index to an intra-day low of 103,741.70bps from its highs of 104,483.39bps, before closing below above its opening level at 103,958.80bps.

Market technicals were weak 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 29% buy position and 71% sell volume. The total transaction volume index stood at 1.01 points, just as momentum behind the day’s performance was relatively strong as Money Flow Index looks up to read 63.42pts, from the previous day’s 58.48pts, indicating that funds entered the market, despite closing in red.

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Index and Market Caps

The NGX All-Share Index at the end of Tuesday’s trading shed 460.20 basis points, closing at 103,958.75bps from 104,418.95bps, representing a 0.44% drop, while market capitalization fell by N284bn, at N64.16r from the previous day’s N64.44tr, representing a 0.44% value loss.

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The session downturn was driven by profit taking in the shares of Dangote Cement, Mrs Oil, FBNH, Redstar, Learn Africa, Fidelity Bank and Unilever, among others. This impacted negatively on Year-To-Date gain that slide to 1.00%, while Market capitalization gain stood at N1.89tr, representing 2.22% increase over its opening level for the year.

Bearish Sector Indices

Sectoral performance indexes were down, save for the NGX Oil/Gas index that closed 1.06% higher, while the NGX Industrial goods led the decliners after losing 1.72% followed by Banking, Consumer goods and Insurance  with 1.21%, 0.26% and 0.03% respectively.

Market breadth was negative, as losers outnumbered gainers in the ratio of 31:29, while activities in volume and value were up after investors exchanged 542.23 million shares worth N13.64bn. Volume was driven by trades in Accesscorp, SterlingNG, Zenith Bank, UBA and FCMB.

Okomu Oil and Eunisell were the best performing stocks, gaining 10% each, closing at N488.40 and N12.54 per share respectively on the back of sentiment and earnings expectation respectively. On the flip side, MRS Oil and Redstar lost 9.95% and 9.90% respectively, closing at N162.90 and N4.55per share, purely on profit taking.

Market Outlook

We expect mixed sentiments to continue as players digest corporate numbers and  more earnings reports hits the market to reveal value and give insight of dividend expectation,  while rebalancing their portfolios midst high inflation and earnings expectations. 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