Market Update for February 5

Midweek’s trading on the Nigerian Exchange sustained the bullish streak, following position taking in banking  and oil stocks, as market players continued to digest and study the latest corporate earnings that price feed on in the short to long run. It is noteworthy that this determines dividend payout in any market condition, even as the power of liquidity in equity investment cannot be overemphasized. At the end of the TB primary market auction on Wednesday, the rates for 91days and 182 days tenor remained unchanged at 18% and 18.5% respectively, while the 364 days tenor further declined to 20.32% from 21.8% in the previous auction. The excess funds chasing this investment option flow to the equity space in search of quick returns for dividend income and capital gain as NGX entered the peak of earnings reporting season that comes with rewards.

The market is set for a new rally in the face of the ongoing volatility due to portfolio rebalancing and sector rotation on the strength of companies’ and sector performance with focus on low valuation and growth opportunities inherent in the different stocks and industries.

During the session, Oando made available its corporate action of a bonus share for every 12 held till closure of its register on February 14 2025 for tranche 1 and June 30 2025 for tranche 2. However, market reacted to the bonus news, which is likely to support share price of Oando in the short to long term. Nascon informed the NGX of its board meeting to approve its audited financial statement for the year ended December 31, 2024, while UACN announced appointment of board chairman.

The recent corporate numbers have offered insights into what dividends some of the companies that have so far submitted their unaudited financial report for the 2024 full-year will look like on the strength of their earnings power and based on their dividend policy. The mixed macroeconomic data and expected economic events would shape market sentiments for companies with December year-end. NGX waves and uptrend are portfolio rebalancing-driven, in addition to profit taking in preparation for more scorecards inflow and dividend expectation in Q1 which is the peak of the earnings reporting season on the NGX. Also, dividend yields remain very important to players at a time like this, by relating price with expected payout of the companies.

The index’s action has extended its markup phase on a very high traded volume and positive market internals that revealed the entrance of smart money that supports continuation of trend or profit taking which needs confirmation. Knowing that one day does not change a trend and it does not change outlook especially with reactions to earnings as market players are digesting these numbers and making their decisions. Investors and traders should look the way of high yield dividend paying companies and growth stocks with higher upside potentials as a number of companies are hitting new 52-week highs. This is due to positive sentiments for some sectors, consolidation moves in some industries and expectations of positive corporate numbers from some others, based on their quarterly and full year unaudited performance, coupled with their  dividend payouts history.

Technically, money flow and other momentum tools were up, presenting buy opportunities for traders who understand the importance of buying low and selling high in any market condition in the midst ongoing volatility and buying sentiment. As the index inched up to signal buy opportunities, thereby creating the perfect setup for high probability of continuation to catch dividend season repositioning at the right price. Also, as the index trades above the T-line and the two moving averages of 50-EMA and 50-SMA, this indicates strength in the midst of changing market fundamentals and technicals on the NGX and the economy.

Also, NGX is set to breakout a strong resistance level of 105,456.40 in the midst of increasing buying sentiment, as candlestick formation and momentum indicators reveal strength in the market. Just as ADX is inched up to read 29.26 points, while RSI and Money Flow Index were up at 66.93 and 71.88 points against the previous session’s 63.98 and 63.36 points respectively. Consequently, market players should watch this current trend and trade wisely in the face of funds entering the market on a buying sentiment in some sectors and position taking in others on a daily time frame. Also, trading volume pattern continued to oscillates, suggesting smart money are making effort to markup prices in the market amid players revaluing the market and short term opportunities, looking at economic events in the face of policy direction of the government that look inconsistent and global economic outlook in the face of trade war tension.

To navigate the rest of Q1 and beyond profitably, it is important to run with economic events, fundamental and technical analysis, join investdata live sessions at noon every Monday, Wednesday and Friday’s trading session“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 pullbacks. Despite the oscillating volume of transaction witnessed in recent time, it is time to position in undervalued stocks, sectors and the next insider playing opportunity.

Oil prices on Tuesday inched down to continue its oscillation, trading at $74.67 per barrel in the midst of US increasing crude inventory and OPEC not changing its production plan till April 2025. Despite the ongoing tariffs driven trade war. Looking at the ceasefire deal in the Middle East, while Russia and Ukraine war continue. As all eyes are on the trade war.  The geopolitical uncertainties across many economies remains a concern to the global economy and energy consumption in 2025. This trend may likely continue, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Trading opened slightly in the upside and it was sustained for the rest of the session, despite oscillating on position taking across the low, medium and high cap stocks. This situation pushed the NGX’s index to an intra-day high of 105,377.80bps from its lows of 104,761.20bps, before closing above its opening level at 105,324.90bps.

Market technicals were strong and positive with higher volume 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 91% buy position and 9% sell volume. The total transaction volume index stood at 1.84 points, just as momentum behind the day’s performance was  strong as Money Flow Index inched up to read 71.88pts, from the previous day’s 63.36pts, indicating that funds entered  the market.

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Index and Market Caps

The benchmark NGX All-Share Index, at the close of trading gained 536.54 basis points, closing at 105,324.89bps from 104,788.35bps, representing a 0.51% growth, while market capitalization rose by N332.25bn, at N65.22r from the previous day’s N64.89tr, representing a 0.51% appreciation in value.

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The upturn was driven by positioning in the shares of FBNH, GTCO, Accesscorp, Eterna, Africa Prudential, Cadbury, UPDC and International Energy Insurance, among others. This impacted positively on Year-To-Date gain that inched up to 2.33%, while Market capitalization gain stood at N2.38tr, representing 3.62% increase over its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed, as the NGX Insurance and Consumer Goods indexes closed lower by 0.67% and 0.44% respectively, while NGX Banking led the advancers after gaining  3.17%% followed by  Energy and Industrial goods with 0.31% and 0.09% respectively.

Market breadth was positive, as gainers outnumbered losers in the ratio of 36:20, while activities in volume and value were up after investors exchanged 1.04 billion shares worth N28.45bn. Volume was driven by trades in Accesscorp, FBNH, UACN, Zenith Bank and Aiico.

Guinea Insurance and Eterna were the best performing stocks, gaining 10% and 9.96% respectively, closing at N0.88 and N30.35 per share respectively on the back of sentiment and market forces respectively. On the flip side, May/Baker and Academy Press lost 9.88% and 9.33% respectively, closing at N7.75 and N2.72per share, purely on profit taking.

Market Outlook

We expect mixed sentiments to continue as investors confidence boost positioning on strong corporate numbers, while rebalancing their portfolios midst high inflation and earnings expectations. Also, sector rotation and portfolio rebalancing continued in the market with investors taking advantage of price correction to buy into value.

This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.

Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

08028164085