Financial analysts foresee a continued bullish trend in the Nigerian stock market for the upcoming week, driven by persistent buying interest in blue-chip stocks. Ongoing asset and sector rotations underpin this positive outlook.
Last week, the stock market witnessed an upward trajectory following Nigeria’s third-quarter economic performance, which exhibited a 2.54% uptrend. Investors engaged in strategic moves, reshuffling portfolios and rebalancing activities in anticipation of the year-end, dividend season, and the potential impact of the forthcoming Santa Claus rally.
The unaudited third-quarter (Q3) 2023 earnings reports have provided insights into the expected Santa Claus rally. Reports presented through the exchange suggest a high likelihood of dividend growth, especially among companies in the service sectors.
Cowry Assets Management Limited analysts express optimism: “We see a sustained bullish trend in the Nigerian stock market with continued buying interest on blue-chip stocks amid ongoing asset and sector rotations.” They attribute this anticipation to the upcoming Santa Claus rally and year-end window-dressing activities orchestrated by fund managers.
The focus on blue-chip stocks aligns with investor preferences for stability and value in well-established companies. The prevailing bullish momentum indicates broader market confidence in the economic outlook, accentuated by traditional optimism associated with the holiday season.
Despite this optimism, Cordros Securities Limited advises caution, anticipating cautious trading due to the absence of significant positive catalysts to boost sentiments. They emphasize the need for positioning in fundamentally sound stocks given the unimpressive macro environment, which remains a significant headwind for corporate earnings.
Last week’s trading activities saw subdued momentum globally, but the Nigerian bourse closed in the green, overcoming pressure from profit-taking activities. The All-Share Index rose by 0.17% week-on-week to close at 71,230.48 points, and the market capitalization of listed equities expanded by N65 billion to close the week at N39.173 trillion.
While the overall market performance was positive, there was a minor setback in the NGX Consumer Goods index with a weekly decline of 0.53%. Conversely, the NGX Insurance index emerged as the leading gainer with a 4.07% increase, while the NGX Banking and NGX Industrial Goods indices recorded gains of 1.94% and 0.04%, respectively.
Market breadth for the week was positive, with 59 equities appreciating in price, 21 equities depreciating, and 76 equities remaining unchanged. The total turnover was 2.425 billion shares worth N22.665 billion in 33,230 deals, indicating active trading activity. The Financial Services Industry led the activity chart, contributing significantly to both volume and value.
As the market heads into the new week, the combination of strategic investor moves, positive earnings reports, and anticipation of year-end dynamics paints a picture of sustained positivity in the Nigerian stock market.
