Mixed Trend Ahead, Amid FGN Bond Offer Kickoff, NGXASI Pullback From Recent Resistance

Market Update for December 14

Tuesday’s trading activities on the Nigerian Exchange witnessed a pullback as the composite All-Share index closed lower on a low traded volume, thereby halting the two previous winning sessions ahead of the Santa Claus rally and in the midst of the Federal Government’s ongoing bond offer as revealed by the time table released by the Debt Management Office, just as MTN Nigeria offer for sale to retail investors came to a close after the day’s trading.

Selloffs and profit-taking among the blue-chips during the session dragged the market down after the NGX index action had formed a double top, thereby sending a mixed signal of how the rest of the week could look like, and ahead of the period that ushers in the Christmas holidays. We note that next week should be the Santa Claus week, judging by the historical patterns and trends, even as there are uncertainties of how trading will go between now and next week with many market players looking forward to the festive season,

However, the prevailing low transaction volume reveals the absence of institutional players in the market, and the expectation of institutional investors ahead of year-end repositioning may push the NGX index action above the 44,000 basis points’ mark, with the help of high cap stocks that are likely to close the year higher.

This means that the retail space is not being singled out, as profit-taking is still evident across the major indexes, following which if there is going to be a Santa rally this year, we can watch for signs that the NGX-30 can hold these recent highs along with other key sectors.

Technically, the NGX index’s action has reversed on selling sentiment, as momentum indicators for the day were mixed, while the ADX is reading 33.49, RSI at 48.68, and Money Flow Index flat at 33.68 points on the daily chart. The continuation of this trend depends largely on the interplay of market forces and the inflow of funds into equity space as trading opens today.

Tuesday’s trading started slightly on the downside, and that was sustained for the rest of the day, as it oscillates on profit-taking in low, medium, and high cap stocks, a situation that pushed the benchmark index to an intraday low of 42,301.42 basis points from its highs of 42,411.12bps before closing below the opening figure at 42,317.52bps.

Market technicals for the session were negative and mixed as volume traded was higher than the previous day’s in the midst of breadth favouring the bears on a selling sentiment as revealed by Investdata’s Sentiment Report showing 85% sell position and 15% buy volume. The total transaction volume index stood at 0.86 points, just as momentum behind the day’s performance remained relatively weak. Money Flow Index read 33.68 points, from the previous day’s 33.39points, indicating that funds entered the market despite sliding down.

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Index and Mkt Cap Movement

The NGX All-Share Index, at the end of Tuesday’s trading, shed 93.6 basis points, at 42,317.52bps after opening at 41,411.12bps, representing a 0.22% drop, just as market capitalization fell by N48.84bn, closing at N22.08tr, from the opening value of N22.13tr, also representing 0.22% value loss.

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The session’s downturn was driven by profit booking in GTCO, Zenith Bank, Access Bank, Stanbic IBTC, Lafarge Africa, UBA, Ecobank Transnational Incorporated, PZ Cussons, and Flour Mills, among others, which impacted mildly on Year-To-Date gain, cutting it to 5.08%. Market capitalization stood at N1.11tr YTD, representing a 4.86% growth from the year’s opening value.

Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX Insurance and Consumer Goods closed higher by 0.35% and 0.08% respectively, while NGX Banking led the decliners, after losing 1.11%, followed by Oil/Gas and Industrial Goods with 0.08% and 0.05% respectively.

Market breadth turned negative as losers outnumbered gainers in the ratio of 23:16, while activities in volume and value terms were mixed after stockbrokers traded 270.09m shares worth N2.30bn, compared to the previous day’s 229.64m units valued at N3.39bn. Volume was boosted by trades in Access Bank, Universal Insurance, Unity Bank, FBNH and International Breweries.

The best-performing stocks for session were Custodian Investment and Royal Exchange which gained 9.86% and 8.62% respectively, closing at N7.80 and N0.63per share respectively on market forces. On the flip side, UPDCREIT and JapaulGold lost 6.67% and 5.13% respectively, closing at N4.20 and N0.37 per share, purely on selloffs and profit-taking.

Market Outlook

We expect a mixed trend as FGN bond offer kickoffs today after the NGX index pulled back from its recent resistance level of 42,436.16point to close above its 50-Day Moving Average on a low sell volume as profit-taking was evident in the midst of assets rebalancing and seasonality that are likely to influence equity prices ahead of year-end window dressing. The high volume traded in the midst of retracement is creating new buy opportunities on the strength of the Q3 numbers. Also, candlestick formation and volume traded during the session revealed that institutional players are not buying especially banking stocks and other blue-chip companies at this moment.  It is equally noteworthy that during a ranging market many players seat on the fence waiting for a breakout or down before jumping into any position.  Even as many stocks are trading within their buy ranges, a situation expected to attract more funds into the stock market, given the Dividend Yield capable of serving as a hedge against inflation.

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Ambrose Omordion

CRO|Investdata Consulting Ltd



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