Positive Sentiment, Profit Taking May Linger On NGX, Amid Bargain Hunting, Christmas Holidays

Market Update for December   18

Trading on the Nigerian Exchange started the week positive as the benchmark NGX All-Share index closed marginally higher, halting the previous session’s loss on a low traded volume and negative market breadth ahead of the Christmas holidays and year-end window dressing.

Monday’s mixed session reflected profit taking and buying interest in some sectors, as bargain hunting activities continued in banking stocks, on the strength of the ongoing portfolio rebalancing and year-end seasonality ahead of the peak earnings reporting and dividend season on the NGX in Q1 2024. We note that the year 2024 is setting off with a financial market reset that comes with challenges and opportunities in the area of building new wealth for discerning market players.

The cautious trading and mixed outlook in the fixed income market due to the rising inflation and decline in the last Treasury Bills auction rates/yields across all tenors in the midst rising economic headwinds has triggered the ongoing inflow to the equity space. This has sustained the relatively uptrend as institutional players continue to increase their position in the market. Already, the Q3 corporate earnings of listed companies, especially the services providers have signaled the possibility of high dividend payment alongside capital gains on a shorter time frame as investors seek to hedge against the raging hyperinflation.

Meanwhile, the NGX index continued to trade above the 72,000 basis points mark and T-line, forming a bullish hammer that needs confirmation as trading activities open on Tuesday morning. It had tested Monday’s high of 72,413.13bps before closing lower on a buying sentiment and positive money flow indices that revealed funds entering the market. At this point, let your technical analysis guide you at all time. Traders and investors are expected to take advantage of any moves in the market to create more wealth by taking the right decision at the right time. Despite, the current disconnection of the stock market from economic reality of the country, which remains a concern for investing public.

Also, we are looking forward to a global and local financial market reset in 2024, even as investors must have a roadmap and actionable trade ideas to guide their decisions in the coming year. The monetary and fiscal policy reforms are yet to give a clear direction of the economy, due to the lack of complementary plans that would sustain any moves made so far. We note that economic activities are dwindling, cost of funds is surging, exchange rate problem continue, in the midst of insecurity, among others. The surging inflation is bound to drive mixed outlook in the market and economy in the first half of 2024.

The positive market metrics supported the uptrend on the NGX as momentum indicators signal recovery, while MACD moved with index action indicating bull divergence on low traded volume and buying sentiment. Meanwhile the dividend paying period in the market draws even closer. A glimpse into what we should expect at year-end has been provided by the unaudited Q3 corporate earnings reports released by listed companies.

To navigate the rest of the month and year profitably using fundamental and technical analysis, join investdata’s live sessions at noon every Monday, Wednesday and Friday “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent mixed trend and  volume pattern, it is time to shop for fundamentally sound undervalued stocks, sector rotation, go for defensive stocks at the next insider playing opportunity.

Oil price oscillation continued, rebounding slightly to trade at $78.08 per barrel in the midst of the Feds comment on rates and high US inventory. Even as the Middle East conflict is taking another dimension, 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.

Meanwhile, Monday’s trading opened slightly in the upside and it was sustained for the session, despite oscillating on positioning in blue chip companies and profit taking in some stocks. This situation pushed the Index to an intraday high of 72,413.13bps from its lows of 72,276.75 points, before closing marginally above its opening level at 72,404.91bps.

Market technicals were positive and mixed with a higher volume traded, when compared to the previous session, in the midst of breadth favouring the bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 94% buy position and 6% sell volume. The total transaction volume index stood at 0.71 points, just as the impetus behind the day’s performance was strong, with Money Flow Index looking up to read 72.49pts, from the previous day’s 70.07pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Monday’s trading benchmark NGXASI inched up marginally by 15.68bps, closing at 72,404.13bps, from the opening of 72,389.23bps which represented 0.02% up. Market capitalization rose by N8.58bn, closing at N39.62tr, from the previous day’s N39.61tr, which also represented a 0.02% value gain.

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The session upturn was driven by buying interests in the shares of UBA, Fidelity Bank, Transcorp Hotel, Oando, Eterna,  Wapco  and Infinity Trust Mortgage Bank, among others. This impacted mildly on Year-To-Date gain, that inched up to 41.27%, while Market Capitalization YTD gain stood at N11.76tr, representing a 41.65% rise above its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed, as the NGX Insurance and Consumer goods closed lower by 1.30% and 0.09% respectively, while the NGX Energy led the advancers after gaining 0.09%, followed by Banking and Industrial goods with 0.02%, 0.03% and 0.01% respectively.

Market breadth was negative as losers outpaced gainers in the ratio of 32:17, while activities in volume and value terms were mixed, after investors exchanged 324.25m shares worth N4.40bn, driven by trades in Mutual Benefits Assurance, UBA, Transcrop, SterlingNG and Zenith Bank.

Infinity Trust Mortgage Bank and John Holt were the best performing stocks, gaining 9.93% and 9.87%, closing at N3.10 per and N2.45 share respectively, on market sentiment and forces. On the flip side, ABC Transport and Etranzact lost 9.89% and 9.42%, closing at N0.82 and N6.25 per share, purely on the back of profit taking and selloffs.

Market Outlook

We expect positive sentiment and profit taking to continue on bargain hunting for dividend paying stocks ahead of Christmas holidays in the midst of sector rotation and portfolio rebalancing on the strength of the better-than-expected corporate numbers released and high yields. However, we note that 2024 is beginning dividend season ahead.

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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