NGX Extends Bullish Momentum Ahead Of MPC Meeting, Quarter End Window Dressing

There was only four trading day during the course of the week due to the Mawlid Al-Nabi celebrations observed by the Muslim Faithfuls.

As a result, the market had a shorter trading window, yet it still exhibited notable activity.

The market displayed a bullish trend for three of those sessions, although it faced a decline just for a day.

The NGX All-Share Index and Market Capitalization both recorded an increase of 0.81%, closing the week at 98,247.99 and N56.457 trillion, respectively.

This uptick resulted in an overall appreciation of NGN 457.3 bil­lion for equity investors, highlighting the resilience of the market despite the shortened trading week, and throughout the week, a total turnover of 1.860 billion shares valued at N38.445 billion was traded across 40,228 transactions.

Such robust activity indicates that investors remain actively engaged, despite the holiday.

The pension index sector emerged as the strongest performer, achieving a week-to-date return of 1.89%.

This performance can be attributed to various factors, including strong fund flows and investor confidence in the sector.

Following closely behind, the banking sector also showed pos­itive movement, increasing by 1.26%.

This rise was largely driven by a bullish trend in the shares of major players like First Bank and Fidelity Bank, which have gained attention due to investors sentiments.

On the other hand, the consumer goods sector recorded the most significant decline, dropping by 0.77%.

This downturn may reflect ongoing challenges in consumer spending and supply chain issues that have affected several com­panies in this sector.

For the month, the All-Share Index has demonstrated a return of 1.73%, while year-to-date returns stand impressively at 31.39%.

This strong year-to-date performance suggests a resilient mar­ket, even in the face of challenges.

NGX Banking Weekly Chart

As we analyse sector performances over the month, the banking sector stands out as the best performer, surging by 6.33%.

This growth can be linked to several factors, including in­creased lending activity and favorable economic indicators.

The pension sector followed with a 3.90% rise, reflecting inves­tor confidence in long-term growth.

However, the insurance sector faced headwinds, declining by 2.10%, indicating potential risks and uncertainties that investors should keep in mind.

In terms of individual stocks, Caverton Offshore Support Group Plc was the top gainer for the week, experiencing a remarkable 45.28% increase to close at N3.69.

This surge reflects heightened interest in the company, which specializes in marine and aviation services.

Fidelity Bank also had a strong week, rising by 24.20% to close at N13.60, bolstered by positive market sentiment and strong quar­terly results.

Fidson Healthcare, a key player in the healthcare sector, saw its shares increase by 21.76%, closing at N15.95, demonstrating investor confidence in the healthcare market’s growth potential. Additionally, Vitafoam Nigeria Plc climbed by 21.55%, closing at N22.00, while Meyer Plc appreciated by 20.93%, ending the week at N7.05.

Conversely, several stocks experienced significant declines. Northern Nigeria Flour Mills Plc, valued at N6.3 billion in mar­ket capitalisation, saw its shares drop by 18.97%, closing at N35.25.

This decline may be linked to market corrections or specific challenges faced by the company.

Mecure Industries Plc also struggled, falling by 18.18% to close at N7.65. Tantalizers, another notable decliner, was down by 14.08%, finishing at N0.61. R.T. Briscoe declined by 12.88%, closing at N3.18, while Chapel Hill Denham experienced a decrease of 9.93%, closing at N101.60.

These declines highlight the volatility present in the market and the need for investors to remain vigilant.

On the international front, the U.S. Federal Reserve announced a 50-basis point cut in interest rates on Wednesday, bringing bor­rowing costs down to a range of 4.75%-5.00%.

This decision is expected to have a ripple effect on the broader economy, enhancing liquidity and stimulating growth.

The immediate response to the announcement was a surge in the S&P 500, reflecting investor optimism about lower borrowing costs.

Simultaneously, the Dollar Index (DXY) fell as other currencies strengthened against the dollar.

This easing of monetary policy is particularly beneficial for emerging markets like Nigeria, where foreign institutional inves­tors may seek more favorable investment opportunities.

However, one critical concern for attracting foreign portfolio investors is the volatility of the naira. A fluctuating currency can deter potential investors who seek stability.

It is essential for Nigeria to address its production sector’s chal­lenges if it wishes to maintain the naira’s strength against other currencies.

Increasing demand for the local currency through robust export activities would help stabilize exchange rates and attract foreign investment.

In terms of inflation, Nigeria’s headline rate decreased to 32.15% in August 2024, down from 33.40% in July.

This drop of 1.25 percentage points is encouraging, but it is important to note that it remains significantly higher than the 25.80% recorded in August 2023, indicating ongoing inflationary pressures. Monthly inflation for August was recorded at 2.22%, slightly lower than July’s 2.28%.

Food inflation reached a concerning 37.52% year-on-year, up 8.18 percentage points from 29.34% in August 2023. On a monthly basis, food inflation stood at 2.37%, showing a slight decline from 2.47% in July.

These figures underscore the need for continued monitoring of inflationary trends and their impact on consumer spending and economic growth.

In a positive development, Nigeria’s foreign exchange reserves rose by $621.2 million over a span of ten days, following the success­ful sale of a domestic dollar bond.

The gross FX reserves increased from $36.24 billion on Sep­tember 2, 2024, to $36.87 billion by September 12, 2024. The largest single-day increase occurred between September 11 and 12, with reserves jumping by $54.4 million.

This growth reflects the favorable impact of domestic dollar bonds on boosting the nation’s reserves and highlights the im­portance of diversifying funding sources for economic stability.

The Monetary Policy Committee is scheduled to meet for its 297th session on September 23-24.

Analysts are largely suggesting either a marginal rate cut or maintaining the current rates.

A slight reduction would be a significant positive for the econ­omy, as it would lower borrowing costs for businesses and indi­viduals.

However, it’s essential to recognize that even with a marginal cut, foreign portfolio inflows may still be limited by high overall borrowing costs.

NGXASI Weekly Chart

Technically speaking, it is evident that the market performed well for the week ending September 20, 2024.
With the festive season approaching, there are strong indications of a potential bull run.
The recent 50-basis point cut by the largest global market is expected to have a significant positive impact on our local exchange, enhancing investor confidence.
Currently, the market is trading above the 8-day moving average, supported by a substantial amount of funds, as indicated by the Money Flow Indicator—a technical measure that assesses the flow of funds into the market.
The relative strength index stands at 56.06, suggesting a positive outlook and indicating the potential for further upside. Investors are encouraged to follow their trading strategies, grounded in strong fundamental and technical analysis.
As always, maintaining a disciplined approach to investing will be crucial in navigating the evolving market landscape.
In summary, the market’s resilience, combined with supportive monetary policy and sectoral performances, sets a positive tone for the upcoming weeks.
Investors should stay informed and adjust their strategies to capitaliSe on potential opportunities while remaining cautious of market fluctuations.