Positive Sentiments May Linger, Amid Bargain Hunting For Dividend Ahead Of Portfolio Rebalancing

Market Update for December   20

The gaining momentum on the Nigerian Exchange increased sharply at the midweek, as the Santa Claus rally continued on accumulation of banking stocks and others across major sectors of the market in the face of seasonality. There is also the ongoing portfolio rebalancing as trading for the year 2023 winds down gradually to usher in the 2024.

The NGX crossed yet another historic psychological line of 73,000 basis points at a new all-time high of 73,397.71bps after testing 73,402.67 points. This revealed the positive sentiments and strong momentum in the midst of weak macroeconomic indices and increasing headwinds, as equity prices move in proportion of the rising inflation and depreciation Naira that are making the stock market more attractive.  This is notwithstanding the challenges and opportunities that come with the global and domestic financial market reset and in the face of rising geopolitical tension, as well as the recent reforms by the fiscal and monetary policies with positive or negative impacts on the economy as being witnessed already.

The benchmark NGX All-Share index closed higher on a very high traded volume and positive market breadth, thereby extending the bull run for a third successive sessions ahead of the Christmas holidays and year-end window dressing. The buying sentiment at midweek reflected position taking across some major sectors of the market in midst profit taking and bargain hunting for blue chip stocks for dividend income and capital gain.  This is based on their earnings released so far that support high possibility of higher payout to match the prevailing market prices.

Cautious trading and mixed outlook continued in the fixed income market, as midweek’s OMO auction rates remain relatively low in the face of high inflation and negative real returns to make the equity space attractive and funds flowing in that direction at the close of the day trading on the NGX.  Also, Institutional players are holding their position in stocks and gradually increasing and accumulating position ahead of year-end. Such situation has relatively supported this ongoing uptrend on NGX. Already, the Q3 corporate earnings of listed companies, especially the services providers have signaled the possibility of high dividend payment, as investors seek to hedge against the raging hyperinflation.

The NGX index’s action broke out the strong resistance of 72,671.08 bps and 73,000 mark to trade above the T-line, to signal a markup phase on a buying sentiment and positive money flow indices that revealed funds entering the market. At this point, let your technical analysis continued to guide you at all time. Market players are expected to take advantage of any moves in the market to create more wealth by taking the right decision at the right time.  Locking in gains on a portion of a trade is a fantastic way to enjoy trading. Despite, the current disconnection of the stock market from economic reality of the country, which remains a concern for investing public.

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.

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Oil price oscillation continued at the international market retrace to trade at $79.32 per barrel in the midst of Russian oil stuck in transit to India and OPEC output cut for 2024, as US shale boom. 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.

Meanwhile, Wednesday’s trading opened on the upside and it was sustained throughout the session on buying interest in banking stocks and other blue-chips, despite, profit taking in some stocks. This situation pushed the Index to an intraday high of 73,402.67bps from its lows of 72,470.10 points, before closing sharply above its opening level at 73,397.71bps.

Market technicals were positive and strong with a higher volume traded, when compared to the previous session, in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 89% buy position and 11% sell volume. The total transaction volume index stood at 1.21 points, just as the momentum behind the day’s performance was strong, with Money Flow Index looking up to read 72.87pts, from the previous day’s 72.47pts, indicating that funds entered the market.

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Index and Market Caps

At the end of  trading, the benchmark NGX All-Share Index gained 927.61bps, closing at 73,397.71bps, from the opening of 72,470.10bps which represented 1.28% growth. Market capitalization rose by N507.6bn, closing at N40.16tr, from the previous day’s N39.66tr, which also represented a 1.28% appreciation in value.

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Midweek’s upturn was driven by buying interests in the shares of Airtel, GTCO, UBA, Accesscorp, Transcorp, NNFM, Stanbic IBTC, PZ, Wapco, Caverton and Infinity Trust Mortgage Bank, among others. This impacted positively on Year-To-Date gain, that increased to 43.21%, while Market Capitalization YTD gain stood at N11.76tr, representing a 43.68% rise above its opening level for the year.

Bullish Sector Indices

Sectoral performance indexes were up, save for the NGX Consumer Goods that closed lower by 0.23%, while the NGX Banking led the advancers after gaining 1.64%, followed by Insurance, Industrial goods and Energy with 0.83%, 0.11% and 0.05% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 37:23, while transactions in volume and value terms were up, after players exchanged 554.64m shares worth N12.83bn, driven by trades in GTCO, Accesscorp, Transcorp, FCMB and UBA.

Transcorp and Multiverse were the best performing stocks, gaining 10% each and closing at N7.70 per and N11.55 share respectively, on market sentiment and forces. On the flip side, Tantalizer and Thomas Wyatt lost 10% and 9.86%, closing at N0.45 and N2.65 per share, purely on the back of profit taking.

Market Outlook

We expect positive sentiments 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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