Mixed Trend Ahead On Portfolio Reshuffling, Year-end Seasonality, Election Uncertainty

Market Update for December 12

The bull trend on the Nigerian Exchange continued Monday, starting the week with marginal gains as the bear and bull fight for dominance lingers, ahead of the release of major macroeconomic report that will further guide investors in the face of year-end seasonality and expected corporate action in the New Year. The benchmark NGX All-Share index closed flat, despite the persistent positive sentiment and strong momentum in the midst of profit taking and portfolio rebalancing.

The market continued to witness intraday mixed session on demand and selloffs in some high, medium and low cap stocks, creating opportunity for discerning investors and technical traders to buy low and sell high, especially as the primary trend of recovery is still intact ahead of year-end expectations. The NGX is looking to breakout the 200-Day Moving Average at 48,956.81 basis points, while at the same forming a double top that supports or signals correction by way of profit taking or trend continuation if it breaks out on a high volume. Already, we have noticed position taking in some of the major sectors of the market continued, especially in industrial goods and banking stocks.

The NGX index action continued its uptrend on a strong momentum at the end of Monday’s trading, just as all eyes are on the November Consumer Price Index and the changing yield environment that may likely trigger an inflow of funds arising from the excess liquidity in the money market at the end of the last week TB primary market auction. This is due largely to the prevailing high dividend yields in the stock market and shorter time frame to achieve similar returns with possibility of capital gains. With the Santa Claus rally around the corner, there is also the year-end window dressing by fund managers, and listed companies who desire to close the year higher.

The topping formation and oscillating volume pattern may finally give way for correction and pullback in the face of the expected closed period notification and 2023 corporate action, just as position taking continues ahead of the full-year earnings season, while bargain hunters and speculators take advantage of this pullback or selloffs to buy low amid a high volatility. Therefore, target companies with a consistent track record of dividend payment with strong fundamentals and growth prospect that will support further price and payout.

Technically, the market may be entering the distribution phase, thereby setting the stage for another uptrend after forming a cup and handle chart pattern on a daily and weekly time frame. The momentum indicators appear strong, as the ADX read 50.06 at the end of the day, just as, RSI and Money Flow Index slowdown to read 78.00 and 88.08 points against the previous session 77.91 and 87.39 points respectively. The continuation of this uptrend depends largely on the interplay of market forces and inflow of funds into market as trading open this last yarding day of the week.

As mentioned earlier, the oscillating volume traded pattern suggests the gradual return of many players who had been seating on the fence before now, including institutional investors holding cash to confirm the primary’s market direction, especially given the anticipated financial market reset in 2023, and beyond expected to create wealth for action takers are underway.

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Oil price oscillation continued, as it rebounded to traded at $79.49 per barrel on low output of US shale production, impact of oil price cap, reopening of some province in Chain after Covid 19 restriction in the midst of geopolitical tension and fear of recession as a result of high interest rate and inflation across the globe. Also, supply tightened due to the Russia-Ukraine war that has been lingering. The up and down movement of oil price also continues to drive volatility.

Meanwhile, Monday’s trading opened on the downside till late afternoon before rebounding slightly on buying interest in Lafarge, banking stocks and others, a situation that pushed the NGX’s index to an intraday high of 48,901.96bps from its lows of 48,853.33bps before closing slightly above its opening level at 48,899.08bps.

Market technicals were strong and mixed, with higher volume of trade than the previous session in the midst of breadth favoring the bears on a strong sentiment as revealed by Investdata’s Sentiments Report showing 94% buy position and 6% sell volume. The total transaction volume index stood at 1.35 points, just as momentum behind the day’s performance was strong as Money Flow Index was looking up at 88.08pts, from the previous day’s 87.39pts, indicating that funds entered in the market.

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Index and Market Caps

At the end of Monday’s trading, the benchmark index NGXASI inched up by 17.15 basis points, closing at 48,899.08 basis points after opening at 48,881.93bps, representing a 0.04% up, just as market capitalization gained N9.34bn closing at N26.63tr from the previous day’s N26.63tr, which also represented a 0.04% value gain.

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The upturn was driven by position-taking in Lafarge, Zenith Bank, FBNH, Learn Africa, Jaiz Bank, SCOA, Fidelity Bank and FCMBl, among others, which impacted mildly on Year-To-Date gain, increasing it to 14.47%. Market capitalization gain YTD dropped slightly to N4.18tr, representing 19.45% rise over the opening level for the year.

Mixed Sector Indices

Sectorial performance indexes for the session were mixed, as the NGX Banking and Industrial goods closed higher by 0.47% and 0.04% respectively, while the NGX Insurance index lost 0.61%.  NGX Oil/Gas and Consumer goods were flat.

Market breadth turned slightly negative as decliners outnumbered advancers in the ratio of 11:10; just as activities in volume and value were mixed, after investors exchanged 230.11m shares worth N2.52bn. Volume was driven by trades in Accesscorp, Jaiz Bank, GTCO, FBNH and FCMB.

Learn Africa and Jaiz Bank were the best performing stocks, after gaining 9.70% and 9.20%, closing at N1.81 and N0.95 per share respectively on market forces. On the flip side, Royal Exchange and Neimeth lost 9.88% and 8.57% respectively, closing at N0.73 and N1.28 per share, purely on selloffs and profit taking.

Market Outlook

We expect a mixed trend and sentiment to continue on profit booking and portfolio reshuffling ahead of year end seasonality in the face of election uncertainty, as pullbacks add more strength to upside potential, so investors should take advantage of price correction ahead of year end seasonality. Also looking at the trends and events across the globe and domestically.

Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605