NGX Sustains Uptrend On Impressive Q3 Numbers, Rally In Big Cap Equities

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The benchmark All-Share Index and market capitalization of the Nigerian Exchange (NGX) have demonstrated notable growth, increasing by 0.48% and 5.95% respectively in the just ended week. The growth, especially in capitalisation resulted from the listing of the entire 4.32 billion ordinary shares of Aradel Holdings by introduction at N702.69 each on the bourse, a situation that significantly impacted the market. The sporadic profit taking and selloffs in the new entrant forced it to close below its listing price on Friday.

The NGX’s index action concluded the trading week at 98,070.28 basis points, while market capitalization reached an impressive N59.425tr. This surge reflects the collective performance of equity investors, whose total portfolios have risen significantly, increasing by N3.535tr.

During this period also, a total of 1.447bn shares valued at N73.889bn, were traded across 29,546 deals.

Prominent among equities traded were Japaul Gold, United Bank for Africa, and Zenith Bank as as top three stocks in terms of transaction volume, accounting for a combined total of 420.318m shares, valued N8.4bn in 5,146 deals.

Despite the positive performance of the All-Share Index during the period, it is important to note that the index still reflects a negative real rate of return when compared to the prevailing double-digit inflation rate in Nigeria, which currently stands at 32.7%.

NGXASI Weekly Chart

In terms of market sentiment, recent data indicates a money flow reading of 48.79, suggesting that there is a moderate level of funds actively participating in the market. This flow has been attributed to increased investor interest in oil and gas stocks, which recently experienced a surge in activity and valuation. Furthermore, the relative strength index (RSI) of the NGX currently stands at 54.99, indicating that there is potential for upward movement in the market as we approach the end of the year and the festive season. The market is trading above the 8-day moving average and slightly above the psychological barrier of 98,000 points, which serves as a significant resistance level. This positioning reinforces the outlook for potential upward momentum in the coming weeks.

Leading the gainers’ chart is Transcorp Power Plc, a major player in Nigeria’s electric power generation sector, boasting a market capitalization of N2.48tr. The company witnessed a remarkable increase of 19.29%, closing at N359.90 each, after it recently reported an astounding 198% year-on-year growth in pre-tax profit in the first nine months of 2024, owing to the robust revenue growth driven by increased demand for electricity. Other notable gainers in the week under review include Mecure Industries, which surged by 18.81% to close at N12.00, and Dangote Sugar, which rose by 13.06% to N35.05 per share. Oando also performed well, as its share price grew by 10% to close at NGN 77.00, while Golden Guinea saw a similar rise of 10%, closing at NGN 3.74.

Conversely, the decliners’ chart was led by Regency Alliance Insurance, which experienced a significant drop of 15.28%, closing at NGN 0.61. Tripple Gee followed closely with a decrease of 14.93%, closing at NGN 1.71. Aradel Holdings faced an 11% depreciation, closing at NGN 626.40, while Caverton Offshore recorded a decline of 9.23%, closing at N2.36 per share. Vitafoam Nigeria also saw a decrease, down by 9.09%, with a closing price of NGN 20.00.

The economic backdrop to these stock market movements is the rising inflation rate in Nigeria, which climbed to 32.70% in September 2024, an increase from 32.15% in August 2024. This represents a month-on-month rise of 0.55%. The inflationary pressures during this period has largely been attributed to escalating transportation costs and food prices. Year-on-year, the inflation rate has risen by 5.98 percentage points compared to the 26.72% recorded in September 2023, highlighting a significant uptick in inflation over the past year. Furthermore, the month-on-month inflation rate for September 2024 was recorded at 2.52%, which is 0.30% higher than the 2.22% observed in August 2024. This suggests that the average price level increased at a faster rate in September than in the previous month.

NGX Banking Index Weekly Chart

The implications of this high inflation rate are critical for the Nigerian economy and financial markets. With the inflation figures remaining at upper double digits, there is a growing expectation that the Monetary Policy Committee (MPC) will once again respond with yet another rate hike. The anticipation of a more hawkish stance regarding borrowing costs typically results in negative reactions from the stock market. Investors are likely to brace for increased volatility and potential downturns as the cost of borrowing escalates. To navigate this challenging environment, market participants are encouraged to consider strategies such as sector rotation and day trading. While long-term investors are certainly a key part of the market, only a select few maintain positions over extended periods during times of heightened uncertainty.

Nigeria’s stock market is currently experiencing a complex interplay of growth and challenges. While the All-Share Index and market capitalization have shown resilience amid rising inflation, the outlook remains cautious. Investors must remain vigilant and adapt their strategies to navigate this fluctuating landscape. The anticipation of a rate hike looms large, and the implications for various sectors will require careful monitoring. In this environment, embracing adaptability through sector rotation and shorter-term trading strategies may prove to be essential for capitalizing on opportunities as they arise.

NGX Oil/Gas Index Weekly Chart