Market Update for January 15

Midweek trading on the Nigerian Exchange continued its bearish momentum, with the benchmark NGX All-Share index pulling back for the fourth consecutive session due to profit taking and selloffs among the highly capitalized stocks in particular. Also, there was the mixed sentiment of buying and selling across the major sectors of the market that further dragged the market down. This provided buy opportunities for discerning investors and smart traders ahead of January Q4 earnings season.

Wednesday’s loss also extended the bear transition of back-to-back even as Nigeria’s December inflation figure rose to 34.80% from 34.60% recorded in November according data by its National Bureau of Statistics which means that fixed income market instruments and treasury bill are still in negative real rate of return, while the stock market remains marginally above inflation despite pulling back on recent profit bookings.

Consequently, market players should expect large price gaps and volatility to continue, but try not to panic at this period of mixed macroeconomic data and expected economic events. In particular, the first Central Bank of Nigeria (CBN) policy meeting for year 2025 is expected to give direction based on the December inflation report looking up again with all eyes on the Q4 and 12 months’ unaudited accounts of quoted companies, especially those with December year-end.

The recent wave on the NGX is just portfolio rebalancing driven, as well as profit taking in preparation for corporate earnings and dividend expectation in Q1 which is the peak of the earnings reporting season that is about to kick off any moment from next week. Also, dividend yield remains very important to players.

The NGX’s index revealed a bearish pattern driven by selloff in highly priced stocks for high yield dividend paying companies and growth stocks with higher upside potentials as a number of companies are hitting new 52-week highs, due to positive sentiment for some sectors, consolidation moves and expectations of positive corporate numbers from some others, based on their quarterly performance and history of dividend payouts.

Also, new year positioning continued on the back of cross deals and others in the market. During the session, more companies notified the exchange of their closed period and board meetings, Standard Alliance Insurance informed the market of delay in filling unaudited and audited financial statements for 2024, Fidelity Bank updated the market of its EGM, while Airtel Africa notified the market of insiders dealings and share buyback updates.

Money flow and other momentum tools were down, 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 is set to breakdown the 102,096.40bps level to sustain downtrend, thereby creating the perfect setup for high probability of continuation to catch new year repositioning at the right price. Also, as the index trades below the T-line and  above the two moving averages of 50-EMA and 50-SMA, this indicates weakness in the midst of changing market fundamentals and technicals on the NGX and the economy.

Technically, the NGX is on a decline phase in the midst of correction, as candlestick formation and momentum indicators reveal somewhat weak in the market. As ADX is looking down to read 50.53 points, while RSI and Money Flow Index were down at 51.13 and 69.90 points against the previous session’s 63.10 and 75.08 points respectively. Consequently, market players should watch this current trend and trade with caution in the face of funds leaving 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 decline, 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, running with economic events, fundamental and technical analysis, join investdata live sessions at noon every Monday, Wednesday and Friday trading day “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 at the midweek rose continuing its oscillation, trading at $81.09 per barrel in the midst of sanction on Russia and US draw in crude oil inventories ahead US inflation data. Even as OPEC project robust demand for oil in 2025 and 2026 in the face of ongoing geopolitical tensions in the Middle East and Russia war with Ukraine. As Trump presidency policy uncertainty threats its trade’s partners and global economy outlook.  The rising geopolitical uncertainties across many economies remains a threat 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, midweek’s trading opened slightly on the upside before pulling back sharply in the afternoon and it was sustained for the rest of the session on selloffs and profit taking on large cap stocks.  This situation pushed the NGX’s index to an intra-day low of 102,096.00bps from its highs of 103,787.09bps, before closing below its opening level at 102,096.00bps.

Market technicals were negative and mixed with lower volume when compared to the previous session in the midst of breadth favoring the bears on a selling pressure as revealed by Investdata’s Sentiments Report showing 0% buy position and 100% sell volume. The total transaction volume index stood at 0.74 points, just as momentum behind the day’s performance was strong as Money Flow Index looks down to read 69.90pts, from the previous day’s 75.08pts, indicating that funds left the market.

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Index and Market Caps

The composite NGX All-Share index shed 1,526.10 basis points, closing at 102,096bps from 103,622.10bps, representing a 1.47% decline, while market capitalization fell by N930.62.bn, at N62.26tr from the previous day’s N63.19tr, representing a 1.47% depreciation in value.

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Midweek’s downturn was driven by profit booking and selloffs in the shares of Dangote Cement, Transpower, Vitafoam, GTCO, Africa Prudential and Custodian, among others. This impacted negatively on Year-To-Date gain as it turned negative 0.81%, while Market capitalization lost stood at N1.53tr, representing 0.81% decline over its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX Industrial goods and Insurance closed lower by 4.70% and 3.47% respectively, while NGX Consumer goods led the advancers after gaining 0.99% followed by Energy and Banking with 0.15% and 0.02% respectively.

Market breadth was negative, as losers outnumbered gainers in the ratio of 39:28, while activities in volume and value were down after investors exchanged 435.54m shares worth N9.44bn. Volume was driven by trades in Universal Insurance, Aiico, Accesscorp, Livestock Feed and NB.

Dangote Sugar and Nascon were the best performing stocks, gaining 10% each, closing at N36.85 and N38.50 per share respectively on the back of sentiment and market forces respectively. On the flip side, Universal Insurance  and Dangote Cement lost 10% each, closing at N0.63 and N387.90per share, purely on selloffs and  profit taking.

Market Outlook

We expect mixed sentiments to continue amid profit taking, as bargain hunters take advantage of pullbacks to position, while rebalancing their portfolios midst high inflation and low valuation ahead of Q4 earnings reports. 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