Positive Sentiments May Continue On Positioning, Amid Portfolio Rebalancing, Earnings Inflow
Market Update for February 8
It was a mixed session on the Nigerian Exchange at the midweek as profit taking continued in the midst of buying interests in Dangote Cement which weighed on the composite NGX All-Share index to close higher on a low traded volume and negative market breadth. This short-lived the previous day’s loss position, as market players look forward to full-year audited results of listed companies with December year-end to start rolling in any moment from next week. Just as January inflation report is also expected to hit the market next week.
As the prevailing disconnection between the recent monetary policy rate of 17.5% and the declining rates in the fixed income space continue, especially the Treasury Bill primary auction rates that had declined for five consecutive offers in the face of high inflation to make the stock market more attractive in the short-term. This is due to ongoing earnings season and high dividend to hedge against inflation, looking at the impressive numbers that are expected to support higher payout or dividend growth in this season, despite the increasing electioneering activities national assembly election.
At the end of midweek’s trading, the market maintained its strong momentum, despite the seeming profit taking in some stocks that had rallied recent and position taking in value equities that pulled back, as index action form a top pattern reversal chart that needs confirmation at the opening of Thursday trading. On the strength of the expected early filers and others, this uptrend should be sustaining in the near term and correct during post earnings season before the governorship election or after due to price adjustment for dividend declared. And, also, the outcome of the elections.
The buying sentiments across some major sectors of the market, except for consumer goods that witnessed selloffs on traders cashing out their profit, this 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, just as it may signal the continuation of this recovery in the month of February, notwithstanding uncertainties associated with the coming 2023 general elections.
Technically, the NGX index’s action had signal markup phase which 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 divergence 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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Oil price oscillation continued, as it sustained it recent rebound to trade at $85.13 per barrel, on Fed monetary easing 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.
Midweek’s trading started slightly in the upside and it was sustained throughout the session, on demand for Dangote Cement, despite profit taking, a situation that pushed the NGX’s index to an intraday high of 54,441.81 basis points from its lows of 54,285.38bps, before closing above its opening figure at 54,427.05bps.
Market technicals were negative and mixed, with lower volume of trade, compared to the previous session in the midst of breadth favoring bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 91% buy position and 9% sell volume. The total transaction volume index stood at 0.45 points, just as momentum behind the day’s performance was strong as Money Flow Index looked down at 80.06pts, from the previous day’s 77.66pts, indicating that funds entered the market.
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Index and Market Caps
NGX All Share Index, at the end of Wednesday trading gained 127.29 basis points, closing at 54,427.05bps, after opening at 54,220.76bps, representing a 0.23% growth, just as market capitalization rose by N60.33bn closing at N29.64tr from the previous day’s N29.58tr, which also represented a 0.23% appreciation value.
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Meanwhile, the session’s upturn was driven by accumulation in the shares of Dangote Cement, Zenith Bank, Fidelity Bank, Africa Prudential, Mansard, UBN, Tripple Gee and Japaul Gold among others, which impacted positively on Year-To-Date gain to reduce 6.20%. Market capitalization YTD gain increased at N1.80tr, representing 6.20% above its opening level for the year.
Mixed Sector Indices
Sectorial performance indexes for the session were mixed, as NGX Consumer goods closed lower by 0.14%, while NGX Industrial goods led the advancers after gaining 0.94%. followed by Banking and Insurance with 0.39% and 0.04% respectively. Just as NGX Energy closed flat.
Market breadth was negative as losers outnumbered gainers in the ratio of 23:11, while transactions in volume and value were down, as market players transacted 151.58m shares worth N1.81bn. Volume was driven by trades in Universal Insurance, Transcorp, GTCO, Sterling Bank and UBA,
The best performing stocks were Tripple Gee and International Energy Insurance, after gaining 9.52% and 9.40% respectively, closing at N1.15 and N1.28per share respectively on market forces and MTO bid at N1.60. On the flip side, Trans nationwide Express and Transcorp lost 9.76% and 6.67% respectively, closing at N0.74 and N1.26per share, purely on selloffs and profit taking.
We expect positive sentiments and trend to continue on positioning and profit taking as portfolio rebalancing in the midst of impressive corporate earnings and outcome of NTB auction, as rates fell further, 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.
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