Mixed Trend May Linger Amid Profit Taking, Portfolio Realignment, Anxiety Over General Elections

Market Update for February 6

Trading activities on the Nigerian Exchange extended its bull-run on Monday to start the week on positive note as the benchmark NGX All-Share index got a boost amidst buying interests in MTNN, and NGX Group among others to sustain the strong momentum that had prevailed so far in the market.
Also, the NGX index action continued its bullish upbeat for the sixth consecutive days, thereby breaking out its 15-year strong resistance level of 54,290.11 on a low traded volume and slightly positive market breadth that revealed profit taking activities at the end of the session. These were amidst portfolio reshuffling by investors and traders in expectation of audited financials and corporate actions, and ahead of the January Consumer Price Index report and the general elections.
The higher momentum recorded on Monday was due to price appreciations among many quoted companies, as investors continue to react positively to the unaudited quarterly and 2022 full-year audited results so far released. Most of the numbers so far released have been healthy, beating analysts’ expectations, while offering an insight into what the companies’ final dividend will look like. This is especially true of those expected to grow their payout, judging by their Earnings Per Share and established dividend policies.
There is positive sentiment and increasing buying interests across some major sectors of the market despite the less than average volume which may continue to support the rally as revealed in the short and medium-term trends which remain intact. Tuesday’s trading will give a clear direction as more companies release their scorecards. This may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the coming 2023 general elections, and possible post-election rally, all things being equal.
Technically, the NGX index’s action had extended its markup phase which had followed through to support the bullish V-shape pattern that indicates reversal or continuation of trend on a daily and weekly time frame. Just as there is a convergence between the index action and MACD on a dally chart that supports uptrend, due to position taking in blue chip stocks. Let us keep our gaze on market forces and money flow.
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Meanwhile, oil price oscillation continued, rebounding to trade at $82.43 per barrel, despite the weak dollar and rising demand of Chinese as their economic recovery in the midst of rising attacked on Ukraine. Just as the geopolitical tension, high interest rate and inflation across the globe continue to threaten the world. Also, supply tightened due to the Russia-Ukraine war that has lingered so far. The up and down movement of oil price also continues to drive volatility across markets.
Monday’s trading started in the upside and it was sustained throughout the session on positioning and profit taking among all class of stocks that had rallied recently, and those value stocks that had potential to appreciate, a situation that pushed the NGX’s index to an intraday high of 54,367.74 basis points from its low of 54,206.40bps, before closing above its opening figure at 54,367.34bps.
Market technicals were positive and mixed, with lower volume of trade, compared to the previous session in the midst of breadth favoring bulls on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 0.58 points, just as momentum behind the day’s performance was strong as Money Flow Index looked flat at 81.38pts, from the previous day’s 81.46pts, indicating there was profit taking in the market.
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Index and Market Caps
The benchmark NGX All Share Index at the end of the day trading gained 154.65basis points, closing at 54,367.74bps, after opening at 54,213.09bps, representing a 0.29% growth, just as market capitalization rose by N84.24bn closing at N29.61tr from the previous day’s N29.53tr, which also represented a 0.29% value gain.
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The session upturn was driven by position taking in the shares of MTNN, NGX Group, IMG, Linkage Assurance, Oando, Transcorp, Jaiz Bank, Unity Bank, Sovereign Trust Insurance and International Energy among others, which impacted positively on Year-To-Date gain to 6.08%. Market capitalization YTD gain stood at N1.78 tr, representing 6.08% above its opening level for the year.

Mixed Sector Indices
Sectorial performance indexes for the session were mixed, as NGX Banking and Energy that closed lower by 0.32% and 0.02% respectively, while NGX Insurance led the advancers after gaining 0.33%. followed by Industrial and Consumer goods with 0.03% and 0.01% respectively.
Market breadth was positive as advancers outnumbered decliners in the ratio of 16:15, while activities in volume and value were mixed, after investors exchanged 191.64m shares worth N4.80bn. Volume was driven by trades in GTCO, Zenith Bank, Chams, UBA and Transcorp.
Sovereign Trust Insurance and Linkage Assurance were the best performing stocks, after gaining 10% and 8.89% respectively, closing at N0.33 and N0.49per share respectively on market forces. On the flip side, Prestige Assurance and FTN Cocoa lost 8.70% and 6.06% respectively, closing at N0.42 and N0.31per share, purely on profit taking.

Market Outlook
We expect positive sentiments and mixed trend to continue on position and profit taking as portfolio rebalancing in the midst of impressive corporate earnings and divergence in fixed income rates and the MPR, amidst the release of more audited earnings and anxiety over the election uncertainty. Any pullback at this point may add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Crucial Announcement
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