Market Update for December 16

Trading activities on the Nigerian Exchange started the week on a bullish note, thereby extending the bull transition for five consecutive sessions on the back of an expanding breadth and high traded volume that signals the Santa Claus rally in the market ahead of year-end. This is as buying sentiment continues across some major sectors of the market in the face of the prevailing runaway inflation in the country. The National Bureau of Statistics (NBS), on Monday reported that inflation in the country attained a new high at 34.6% in November, thereby negatively impacting the real rate of returns in the country’s fixed income market instruments, among others. The benchmark All-Share index of the NGX has yielded year to date gain of 33.63%, even as it sustains the year’s uptrend and recovery. At this recent rally, profit taking is underway, a situation that could create new entry opportunities in the market as some stocks on the exchange are making new 52-week high ahead of the Q1 earnings season that starts in January with unaudited reports.

The positive momentum and above-average traded transaction are reflections of inflow of funds into the equity space, as sector rotation and portfolio rebalancing continued to ushers in the New Year 2025. The gradual return of smart money at the current state and timing of the market creates buying opportunities for discerning players ahead of January effects that had turned a positive pattern and trends on the NGX in recent years to guide positioning in the right stocks at the right prices. The nation’s economic managers continue to trade the economy for foreign inflow with high interest rate that is driving low productivity and failed to checkmate inflation of today.

The NGX’s index with a saucer chart pattern formation reveals bullish trend, as players are looking to positive trend, with increasing number of companies hitting a new 52-week high. Just as end of the year positioning continued on the back of cross deals and others in the market. During the session, Oando released its Q3 numbers which was positive.

Money flow and other momentum tools were up, presenting buy opportunities for market players who understand the importance of buying low and selling high in any market condition in the midst ongoing volatility and buying sentiment. As index tested 100,086.34bps level to sustain uptrend, thereby creating the perfect setup for high probability of continuation to catch end of year 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 relatively strength in the midst of changing market fundamentals and technicals on the NGX and the economy.

Technically, the NGX is on a markup phase in the midst of recovery, as candlestick formation and momentum indicators reveal strength in the market. As ADX is looking up to read 23.37 points, while RSI and Money Flow Index were up at 73.08 and 79.42 points against the previous session’s 68.92 and 72.35 points respectively. Consequently, market players should watch this current trend and trade wisely in the face of funds entered 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 buying interest and selloffs in the market amid players revaluing the market and economic events in the face of policy direction of the government that look inconsistent.

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Oil prices on Monday inched up to continue its oscillation, trading at $74.08 per barrel in the midst of China increasing oil importation and expected US rate cut. Even as OPEC delay production hike in the face of ongoing geopolitical tensions in the Middle East and Russia war with Ukraine. As US President-elect tariff threats its trade’s partners and global economy outlook.  The rising geopolitical uncertainties across many economies remains a threat to the global economy and energy consumption. This trend may likely continue for the rest of 2024, 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.

Meanwhile Monday’s trading opened in the upside and it was sustained throughout session, on accumulation of blue chip companies and others stocks.  This situation pushed the NGX’s index to an intra-day high of 100,086.80bps from its lows of 99,389.15bps, before closing above its opening level at 99,922.63bps.

Market technicals were positive and strong with higher volume 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 76% buy position and 24% sell volume. The total transaction volume index stood at 1.45 points, just as impetus behind the day’s performance was  strong as Money Flow Index inched up to read 79.42pts, from the previous day’s 72.35pts, indicating that funds entered the market.

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Index and Market Caps

The composite NGX All-Share Index, at the end of Monday trading gained 544.57 basis points, closing at 99,922.63bps from 99,378.06bps, representing a 0.55% growth, while market capitalization rose by N331.bn, at N60.57tr from the previous day’s N60.24tr, representing a 0.55% appreciation in value.

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The upturn was driven by buying interests in the shares of Aradel, Ucap, Conoil, Wapco, Oando, NB, International Breweries, FBNH and Wapco, among others. This impacted positively on Year-To-Date gain as it inched up to 33.63%, while Market capitalization gain stood at N16.24tr, representing 47,28% growth over its opening level for the year.

Mixed Sector Indices

Sectoral performance indexes were mixed, as NGX Consumer and Industrial goods closed higher by 1.24% and 0.09% respectively, while NGX Insurance led decliners after losing 0.96% followed by Banking and Energy with 0.06% and 0.02% respectively.

Market breadth was positive, as gainers outnumbered losers in the ratio of 33:25, while activities in volume and value were up after investors exchanged 754.23m shares worth N16.88bn. Volume was driven by trades in  SterlingNG, Wema Bank,  Etranzact, Accesscorp and UBA.

Royal Exchange and International Breweries were the best performing stocks, gaining 10% and 9.90% respectively, closing at N0.66 and N4.55per share respectively on the back of sentiment and market forces respectively. On the flip side, University Press and Hmcall lost 9.81% and 9.62% respectively, closing at N3.77 and N4.70per share, purely on profit taking and selloffs.

Market Outlook

We expect volatility and mixed sessions to continue amid profit taking, as bargain hunters position, while rebalancing their portfolios midst high inflation, low valuation and position taking by smart money for year-end. Also, sector rotation and portfolio rebalancing continued in the market with investors taking advantage of pullbacks and 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