Market Update for December 28
Nigeria’s stock market rebounded on Thursday amid a positive momentum that reflects the renewed buying interest in the large cap stocks, pushing the benchmark NGX All-Share index higher to another new all-time high. Transaction volume was low, just as market breadth turned positive in the face of continued strategic portfolio rebalancing and profit taking by traders and investors ahead of the last trading session of 2023. Thursday’s gain wiped off losses suffered in the two previous trading sessions, halting the pullbacks.
The NGX rebound signal the continuation of the Santa Claus rally and year-end window dressing by portfolio managers and others, as the year 2024 is downloading with mixed expectations, challenges and opportunities that will create more wealth for discerning investors and smart traders. Profit booking in banking stocks is creating new entry opportunities for market players as the sector remains the most consistent with dividend payments, especially as we are entering another earnings reporting and dividend season in Q1 2024. This is despite the continuously changing market fundamentals and liquidity level.
The mixed outlook for fixed income market in the face of rising inflation and depreciating naira value has supported funds flowing into the equity space as players hedge against Nigeria’s prevailing hyperinflation. Stocks are also becoming cheaper even at this current market value due to the exchange rate that is revealing their high upside potentials if foreign investors return as a result of the likely rate cut in the matured economies. This is just as the government is expected to put the economy in the path of recovery with fiscal and monetary policies in the midst of ongoing global and domestic financial markets reset.
Meanwhile, at the end of Thursday, the NGX index’s action retraced up, trading above the 74,000 psychological line and the T-line, indicating its entry into the markup phase on a buying pressure and improved momentum as revealed by technical tools and indicators. Market players should allow technical analysis to guide them at all time. This new uptrend should create more wealth for investors if it is sustained as investors expectedly buy and sell right in any market condition. Despite, the current disconnection of the stock market from the country’s economic reality, which remains a concern for investors, even as the dividend paying period in the market draws even closer.
A glimpse into what we should expect in Q1 2024 has been provided by the unaudited Q3 corporate earnings reports released by listed companies.
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Oil price oscillation continued as it fell marginally to trade at $79.12 per barrel in the midst of worries over supply disruptions due attack on the Red sea and rising US inventory. Even as the Middle East conflict is taking another dimension amid calls for another ceasefire, while the three major central banks left rates unchanged due to cooling inflation and outlook of rates cut in 2024. The influence of demand and supply oil are worsened by the geopolitical tensions rising across the globe at a time the Russia-Ukraine war gradually approaches its third year. The war remains a major cause for concern with much more at stake than previously thought. The supply tightening due to the Russia-Ukraine war will propel the up and down movement in oil price, which also drive market volatility across the globe.
Thursday’s trading started in the green and it was sustained throughout the session on demand for highly priced stocks and others, a situation that pushed the Index to an intraday high of 74,734.59 basis points, from its lows of 74.504.58bps. The market closed higher than its opening level at 74,502.58bps. Market technicals were positive and mixed with a lower volume traded, when compared to the previous session, in the midst of breadth favoring the 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 0.84 points, just as the impetus behind the day’s performance was strong, with Money Flow Index looking down to read 72.34pts, from the previous day’s 73.66pts, indicating that funds left the market, despite closing in green.
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Index and Market Caps
At the close of Thursday’s trading, the NGX All-Share Index gained 733.94bps, closing at 74,502.58bps, from the opening of 73,768.64bps, representing a 0.99% growth. Market capitalization also rose by N401.63bn, closing at N40.77tr, from the previous day’s N40.37tr, which also represented a 0.99% appreciation in value.
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The upturn was driven by buying interest in the shares of MTNN, Dangote Cement, Stanbic IBTC, PZ, Zenith Bank, Mansard and Dangote Sugar, among others. This impacted positively on Year-To-Date gain, that increased to 45.37while Market Capitalization YTD gain stood at N11.92tr, representing a 45.98% rise above its opening level for the year.
Bullish Sector Indices
Sectoral performance indexes were up, except for the NGX Banking that closed 0.22% lower, while the NGX Insurance led the advancers after gaining 2.06%, followed by Industrial goods, Consumer goods and Energy with 1.10%, 0.11% and 0.02% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 37:27, while transactions in volume and value terms were mixed, after investors exchanged 384.58m shares worth N5.67bn, driven by trades in Jaiz Bank, Zenith Bank, Accesscorp, Vertiskapital and Transcorp.
Ikeja Hotel and Multiverse were the best performing stocks, gaining 10% and 9.96% respectively, closing at N5.50 per and N15.69 share respectively, on market sentiment and forces. On the flip side, UACN and John Holt lost 10% and 9.76%, closing at N12.15 and N2.32 per share, purely on the back of profit taking and selloffs.
Market Outlook
We expect positive sentiment and profit taking to finish the year higher on bargain hunting for dividend paying stocks in the midst of sector rotation and portfolio rebalancing. However, we note that 2024 is the beginning with unaudited 2023 accounts and dividend season.
Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.
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