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Nigerian stocks mounted an aggressive recovery toward the end of the month, reversing a two-week slide after significant volatility in Open Market Operations (OMO), as the bourse continued to swing on renewed interest following sustained dips engineered by OMO variations.
The All-Share Index (ASI) was up by almost 81–90 bps in late-month trading, with indices trading higher as investor funds’ gains topped N1.3 trillion+ within a few days
The upward move reflects significant market resilience, as keen bulls fought fiercely against major psychological support levels following what is perceived as shallow bouts of targeted profit-taking on the exchange.
Nigerian equities look quite appealing compared to regional emerging markets, and we continue to see Nigerian major tier-1 banks and industrials trading at very attractive trailing PEs, averaging in most cases in the 3.x-6.x range, far from historic averages and regional peers.
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Corporate earnings continue to show resilience despite challenging macroeconomic factors such as FX normalization and inflation pressures.
The promotion into the club of emerging/ frontier market assets under the FTSE index will force foreign portfolio investors who use the indices as a basis to re-index and re-align portfolios to hold Nigerian assets. This will likely trigger the accumulation window before the actual inclusion on September 21.
Unlike local, consumer-led rallies that focus on high beta micro-cap stocks, inclusion into the FTSE benchmark primarily targets stocks of heavily weighted, liquid sectors (e.g., tier 1 Banks, top-flight Oil and Gas, multinationals with significant manufacturing).
Market experts envisage hectic jockeying as traders attempt short-term gain trades, taking advantage of weak-hand profit-taking and minor price dips and creating entry opportunities for institutional desks with an eye on accumulation before the 21st of Sept.
Technical Action
The NGX ASI rebounded from a crucial medium-term average, preventing further technical selloff.
The fresh bounce led to a hammer/pin formation on the daily chart, suggesting we had returned to an upside-inclined trajectory at the short-term level. Oil and gas spearheaded the rebound following oversold levels, while industrial and consumer goods continued to consolidate near the peak.
The late-Aug rebound, accompanied by a surge in trade volumes, suggests institutional accumulation on account of the price of pullback, beyond mere retail participation.
Immediate Resistance (243,000 – 245,000): Next significant overhead ceiling is above 243,000 on the weekly would negate the structure of this latest correction and bring about testing the recent highs once again.
Crucial Pivot / Control Area (240,000 – 241,300): Regaining the psychological 240k marker, this area (where we are trading near with a weekly close of about 241,298) has turned from resistance to immediate tactical support. Bulls would want to hold it.
Major Support / Safety Area (235,000 – 238,680): Market participants might continue to price it in above 238,600, the intermediate trend bull structure is still healthy; a break and fall below this region brings a test to lower support around 235,000 into play.
Outlook
September usually sees portfolio restructuring ahead of the pre-release of Q3 corporate results. High volatility is expected in the initial part of September as market players digest macro releases, inflation prints, and government policies.
Market participants will be on the lookout for accumulation in sound, high-liquidity stocks – primarily tier-1 banking names, i.e., First Holdco, Access Holdings, GTCO, and solid industrial companies, i.e., Seplat- while maintaining sufficient cash buffers to leverage any minor pullback. A continued upward move above the resistance level will tell whether Sept can roll into another broad bull phase.
