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NGX May Range Amid Slow Funds Inflow To Equities, Changing Outlook

Market Update for December 22 2021

NGX May Range Amid Slow Funds Inflow To Equities, Changing Outlook

Selling pressure and volatility continued on the Nigerian Exchange at the midweek as the benchmark NGX All-Share

Index closed lower on a negative sentiment and low traded volume, in the midst of positive breadth with Santa Claus defying the age-long tradition ahead of the Christmas celebration and holidays. Equity prices continue dipping to create buy opportunity for discerning investors and traders.  We hope for a turnaround of events on the space before the week ends, since other underlying factors are still expected to influence investors’ sentiments.

Trading metrics for the session revealed block deals in form of cross transaction on the top trades, indicating mixed movement in stocks like UACN, with sentiment report revealing a buy volume on the daily and weekly time frame, while FBNH indicates a sell volume on the same time frame. 

Also, the 2021 historical trends and patterns appear to be far from sight and gradually becoming a mirage, as market players look forward to year-end dressing by quoted companies and fund managers. Technically, the NGX index’s action had a further pullback and investor vibes as it trades below the   50-Day Moving Average. Also, the prevailing low traded volume reveals the ongoing low liquidity and absence of institutional players in the market. Momentum indicators for the day were mixed, just as the ADX is reading 23.19, RSI below the 50 at 47.22 and Money Flow Index looking up at 34.37 points on the daily chart.

The continuation of this trend depends largely on the interplay of market forces and inflow of funds into the equity space as fixed income market yields direction remains unclear. Meanwhile, the midweek’s trading started slightly in the green and oscillated for the rest of the session on buying interests and selloffs in blue-chip stocks that pushed the NGX index to an intraday low of 42,240.71 basis points, from its highs of 42,390.74bps and thereafter close below its opening point at 42,244.22bps.Market technicals were negative and mixed as volume traded was lower than the previous day’s in the midst of positive breadth on a selling pressure as revealed by Investdata’s Sentiment Report showing 98% sell position and 2% buy volume.

The total transaction volume index stood at 0.73 points, just as impetus behind the day’s performance remained relatively weak. Money Flow Index is look up at 34.37 points, from the previous day’s 33.66 points, indicating that funds entered the market, despite the down market. 

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The benchmark index NGXASI, at the end of the day’s trading, slipped by 144.35 basis points, at 42,244.22bps after opening at 41,388.57bps, representing a 0.34% decline, just as market capitalization fell by N75.35bn, closing at N22.05tr, from the opening value of N22.13tr, also representing 0.34% in value loss.

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sectoral indexes recorded a mixed performance, as NGX Oil/Gas and Banking indexes closed 0.45% and 0.43% lower respectively, while the NGX Insurance led the advancers, after gaining 1.17%, followed by Consumer and Industrial Goods with 0.05% and 0.02% respectively.

Market breadth remained positive as gainers outnumbered losers in the ratio of 17:14, while activities in volume and value terms were up after stockbrokers transacted exchanged 224.03m shares worth N2.66bn, compared to the previous day’s 142.17m units valued at N2.49bn. Volume was driven by trades in UACN, Mutual Benefits Assurance, Sovereign Trust Insurance, Veritaskap and Access Bank.Cutix  and May & Baker were the best-performing stocks after gaining 10% each, closing at N2.64 and N4.51 per share respectively on market forces and earnings expectations. On the flip side, Royal Exchange and Lasaco lost 6.62% and 6.37% respectively, closing at N0.70 and N1.03 per share, purely on profit taking.Market OutlookWe expect the NGX to range at this levels of 42,388.57 and 42,128.73 as inflow into the equity space is looking up slowly on changing investment decisions to keep this trend ahead of Christmas holidays. 

As market players digest economic data and happenings in the fixed income market after the NGX index action retraced to trade above its 50-Day Moving Average on a low buy volume in the face of assets rebalancing and seasonality likely to influence stock prices ahead of year-end window dressing. 

The relatively low 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 yet.  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. 

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