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Stock Market Gains N67BN Amid Profit-Taking, Mixed Sentiments

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The first full trading week of December unfolded on a positive note, with investors and fund managers engaging in year-end seasonality activities and strategic portfolio rebalancing.

The benchmark index of the stock market demonstrated resilience, posting a 0.17% week-on-week advancement and reaching a new high of 71,808.64 points, despite instances of profit-taking.

The week concluded with the index settling at 71,541.74 basis points on the backdrop of reactions and sentiments regarding the ongoing stress test of the capital adequacy ratio (CAR) of Nigerian banks with international operations, which triggered sell-offs on Thursday while market gained in three of the five sessions this week.

As the year gradually winds down, paving the way for the forthcoming earnings reporting and dividend season in Q1 2024, the equities market exihbited a nuanced trend.

Investors treaded cautiously across sectors, diligently seeking fundamentally strong yet attractively priced stocks.

The index’s retracement to its consolidation range, coupled with the formation of a reversal pattern, hinted at a potential bearish sentiment following a recent correction.

The market capitalization experienced a reversal in its trajectory, registering a 0.17% week-on-week upswing to reach N39.149 trillion.

This reversal was attributed to strategic moves by investors in the banking and consumer goods sectors, setting the stage for the anticipated Santa Claus rally. The year-to-date return for the index reached an impressive 39.59%.

Despite the overall mildly positive market performance, sectoral dynamics revealed a mixed bag. The Industrial, Insurance, and Oil & Gas indexes faced minor setbacks, witnessing declines of 3.03%, 1.44%, and 0.58%, respectively.

Pressured sell-offs across counters such as OANDO, MRS, JULI, BUACEMENT, MANSARD, and MBENEFIT contributed to these declines.

Conversely, the Banking and Consumer Goods indexes recorded gains of 6.08% and 0.21%, respectively. This upward trajectory was fueled by notable price increases in ETI, ACCESSCORP, FBNH, JAIZBANK, PZ, NNFM, and INTBREW.

In terms of trading activity, the week witnessed a varied outing, marked by a 4.74% decrease in total traded volume to 2.42 billion units. The number of trades followed suit, declining by 3.97% to 34,704. However, the weekly traded value experienced an uptick of 16.63% week-on-week, reaching N45.07 billion.

Top gaining stocks for the week included MULTIVERSE, THOMASWY, ETI, NSLTECH, and ACCESSCORP, each securing impressive gains of 57%, 33%, 21%, 17%, and 12%, respectively, from their previous week’s closing prices.

On the flip side, stocks such as OANDO (12%), MRS (10%), UNITYBNK (9%), and BUACEMENT (7%) faced declines in their share prices on a week-on-week basis.

Outlook

Looking ahead to the coming week, market experts’ expectations include further profit-taking activities and potential market corrections following the recent surge.

“Investors are likely to continue rebalancing their portfolios in anticipation of the reporting and dividend earnings season. Additionally, caution may prevail in the market as stakeholders await the planned stress test of the capital adequacy ratio of Nigerian banks with international operations,” Cowry Research experts said in a note available to BUSINESS METRICS.

They are also of the view that this cautious sentiment is underscored by prevailing global risks, including high inflation and FX volatility, prompting investors to tread cautiously as they await the anticipated Santa Claus rally.

“Amidst all these, we maintain our advice to investors on taking positions in stocks with sound fundamentals and whose earnings yield and earnings per share support higher payout ratio,” they added.

Elsewhere, Cordros Research analysts expect the market to remain mixed in the coming week as investors cherry-pick counters given the absence of any significant positive catalysts.

“Overall, we reiterate the need for investors to seek positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings,” they said.

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