Market Update for January 22
Profit taking resurfaced on the Nigerian Exchange at the midweek, as selloffs hit medium and large cap stocks, which pulled back the benchmark NGX All-Share index as it closed lower on a low traded volume and market internals at par in the midst of corporate earnings reports kicking off with the unaudited Q2 results from Enuisell Interlinked and the audited full-year accounts from Deap Capital and Transcorp Power Plc.
The quarterly and full year numbers from Deap Capital were in red, while Transpower posted impressive performance for the period, growing its top and bottom lines by 115% and 165% respectively, which translated to Earnings Per Share of N10.67, from which the directors recommended a final dividend of N3.50 each. Secure Electronic Tech, however, released mixed unaudited full year numbers.
Midweek’s pullback and the distribution phase of the market were attributed to profit booking that creates opportunities for market players buy into value and reposition their portfolios in the midst of prevailing low valuation. Also, January trading patterns comes with insights of what a company’s dividend will look like on the strength of the expected Q4 and unaudited full year earnings results that just kicked off. Volatility continued in the face of mixed macroeconomic data and expected economic events to shape the market sentiment with flow of funds on the state of expected corporate earnings, especially for companies with December year-end.
The recent waves on the NGX are just portfolio rebalancing-driven, as well as profit taking in preparation for scorecards inflow and dividend expectation in Q1 which is the peak of the earnings reporting season on NGX. Also, dividend yield remains very important to players. The NGX All-Share index has so far revealed a bullish pattern that supports uptrend, as market players position in 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, more companies notified the exchange of their closed period and board meetings. They include BUA Foods and others, while Airtel Africa also continued to update the market of its share buyback. Just as Oando informed the exchange of its successful bid for block kon 13 in Angola. Also Cornerstone Insurance notified the market of the resignation of its executive director.
Technically, money flow and other momentum tools were somewhat 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 buying sentiment. As the index pulled back to signal buy opportunities, 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 two moving averages of 50-EMA and 50-SMA, this indicates somehow indecision 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 decreasing traded volume, as candlestick formation and momentum indicators reveal somewhat correction in the market. ADX is looking down to read 38.29 points, while RSI and Money Flow Index were down at 55.50 and 60.99 points against the previous session’s 58.03 and 63.06 points respectively. Consequently, market players should watch this current trend and trade wisely 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 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.
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Oil prices at midweek further pulled back to continue its oscillation, trading at $78.12 per barrel in the midst of changing dynamics of fear supply deficit due sanctions and ncresed demand instead of early concerns of surplus. Even as a delay to his tariff threats boosted bearish sentiment in the face drop in US crude inventories. 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 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.
Trading for the session opened slightly in downside and was sustained for the rest of the session on profit taking in high cap stocks and others. This situation pushed the NGX’s index to an intra-day low of 102,833.60bps from its highs of 103,157.2bps, before closing below above its opening level at 102,836.10bps.
Market technicals were mixed and weak with lower volume when compared to the previous session in the midst of breadth at a par on a selling sentiment as revealed by Investdata’s Sentiments Report showing 1% buy position and 99% sell volume. The total transaction volume index stood at 0.73 points, just as energy behind the day’s performance was relatively strong as Money Flow Index looks down to read 60.99pts, from the previous day’s 63.06pts, indicating that left the market.
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Index and Market Caps
The composite NGX All=Share Index, at the end of the day trading shed 320.85 basis points, closing at 102,836.40bps from 103,157.20bps, representing a 0.29% decline, while market capitalization fell by N197bn, at N63.15r from the previous day’s N63.34tr, representing a 0.29% value loss.
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Midweek’s downturn was driven by profit taking in the shares of MTNN, Honeywell, Dangote Sugar, Prestige,Conhall, May/Baker and Redstar, among others. This impacted negatively on Year-To-Date gain as it turned negative 0.09%, while Market capitalization lost stood at N1.51tr, representing 0.78% increase over its opening level for the year.
Bearish Sector Indices
Sectoral performance indexes were down, save for NGX Banking indexes that closed 0.61% higher, while the NGX Insurance led the decliners after losing 0.91% followed by Consumer, Industrial goods and Energy with 0.26%, 0.18% and 0.11% respectively.
Market breadth was flat, as gainers were equal to losers in the ratio of 24:24, while activities in volume and value were mixed after investors exchanged 384.94 million shares worth N14.83bn. Volume was driven by trades in Accesscorp, UBA, SterlingNG, Aiico and Zenith Bank.
SCOA and Cadbury were the best performing stocks, gaining 9.70% and 9.65% respectively, closing at N3.28 and N25.00 per share respectively on the back of sentiment and market forces respectively. On the flip side, Multiverse and May/Baker lost 9.87% and 9.78% respectively, closing at N10.05 and N8.30per share, purely on profit taking.
Market Outlook
We expect mixed sentiments to continue as player 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