Mixed Sentiments May Continue On NGX, Amid Profit Taking, As Investors Realign Portfolios

Market Update for November 28

Trading activities on the Nigerian Exchange on Tuesday had a mixed session of profit taking and buying interests across major sectors of the market on a high traded volume and negative market breadth, thereby halting the three successive sessions of bull transition. The benchmark NGX All-Share index closed lower on selling sentiments in the face of continued portfolio rebalancing and sector rotation, as market players continue to interpret the policy outlook and direction of the Central Bank of Nigeria (CBN). Investdata News recalls that the CBN Governor, Olayemi Cardoso, last weekend in Lagos spoke of plans towards achieving the Federal Government’s target to grow the country into a US$1tr economy. We also note that Nigeria has had two consecutive quarters of rate hikes, as well as the proposed fresh round of bank recapitalization as part of bids to drive the much expected economy development in the face of a significant devaluation of the Naira and surging inflation.
The market reversed its previous gain as prices fell due to profit booking in the shares of highly priced companies, pulling the index down after days of divergence between MACD and index action in the midst of above average traded volume ahead of the year-end seasonality. There is also the dividend season in Q1 2024, while all eye on the Santa Claus rally, year-end window dressing and 2023 audited full-year earnings reporting season which kicks offs 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, even as the latest numbers from FCMB Group beat market expectation with top and bottom lines growing by 76% and 114% respectively, much in line with developments seen among its industry peers already. The numbers translated to earnings per share of N2.48 each, resulting in full-year EPS projection of N3.31, which is likely to support a higher dividend payout, even with expected recapitalization in its industry.
The divergence between the index’s action and momentum indicators signals the onset of correction that is underway or continuation of trend that needs to be confirmed as the NGX index is still ranging and consolidating to trade above the T-Line and 71,000 mark, as it pulled back from the previous session’s level.
Traders need to watch out as the market consolidates at this level of distribution phase amidst the high volatility, while the market remains the quickest way to hedge against the rising inflationary pressure in the system today. So, this ranging and correction will create another entry opportunity for discerning market players, as the market looks to another TB primary market auction to give further insights into the flow of funds in the financial market, in the midst of expected rate hike according to CBN,
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Oil price oscillation continued, as it rebounded to trade $81.66 per barrel in the midst of OPEC meeting on quota adjustment for the 2024 and US inventory see dips in the face of Russia crude flows rebounding, Saudi likely to extend its voluntary cut and the ceasefire in the middle east conflict. 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.
Meanwhile, Tuesday’s trading started in the upside and was sustained till midday before pulling back for the rest of the session, on profit taking in large cap stock and blue chip companies, a situation that pushed the Index to an intraday low of 71,000.10bps from its highs of 71,438.19bps, before closing below its opening level at 71,041.29bps.
Market technicals were negative and mixed with a lower volume traded, 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 9% buy position and 91% sell volume. The total transaction volume index stood at 1.23 points, just as the energy behind the day’s performance was strong, with Money Flow Index looking down to read 69.05pts, from the previous day’s 76.93pts, indicating that funds left the market.
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Index and Market Caps
At the close of Tuesday’s trading, the NGX All-Share Index shed 312.53bps, closing at 71,041.05bps, from the 71,353.81bps opening level, representing a 0.44% decline. Market capitalization fell by N164.76bn, closing at N38.87tr, from the previous day’s N39.04tr, which also represented a 0.42% depreciation in value. The different between the index and market cap percentage change was due to relisting of Consolidated Hallmark Holdings
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The downturn was driven by profit taking and selloffs in the shares of BUA Cement, Dangote Cement, Stanbic IBTC, Accesscorp, GTCO, Zenith Bank, Wapco, Dangote Sugar and NB among others. This impacted negatively on Year-To-Date gain, reducing it to 38.61%, while Market Capitalization YTD gain stood at N10.74tr, representing a 39.54% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes closed mixed, as the NGX Insurance and Industrial Goods index closed lower by 1.27% and 1.25% respectively, while the NGX Banking led the advancers after gaining 0.06%, followed by Consumer goods with 0.04%. while NGX Oil/Gas finished flat.
Market breadth turned negative as losers outnumbered gainers in the ratio of 40:18, while activities in volume and value terms were mixed, after players exchanged 534.62m shares worth N5.62bn, driven by trades in Accesscorp, Transcorp, UPDCREIT, UBA and Unity Bank.
NSLTECH and Sunu Assurance were the best performing stocks, gaining 10% and 9.68%, closing at N0.66 and N1.36per share respectively, on market sentiment and forces. On the flip side, Omatek and Ikeja Hotel lost 10% and 9.87%, closing at N0.81 and N4.20 per share, purely on the back of profit taking and selloffs.

Market Outlook
We expect mixed sentiment to continue on profit taking and portfolio realignment ahead of year end in the midst of sector rotation 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.

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