Market Roundup for September
The Nigerian Exchange Limited (NGX) recorded a bullish momentum in the month of September despite the mixed sentiment and trend at the beginning when the benchmark All-Share index fell below the T-line, closing higher.
As such, the NGXASI halted two consecutive months of selloffs and pullbacks, but the third quarter still closed in the red due to increased ‘selloffs’ in blue chip stocks and highly capitalized companies. During the month, market players took advantage of the correction and mixed trends as reflected in the less-than-average traded volume for the month and ahead of the Q3 earnings reporting season, as well as the year-end seasonality.
The period under review was mixed with the NGXASI reversing its decline phase amid positive market internals. In the process, the index broke out the 50 Moving Average and strong resistance level of 98,000 basis points to test 99,175.85 basis points before retracing to close above the critical support level at 98,558.79bps, while remaining on the path of recovery on the daily, weekly and monthly chart to trade above the T-line.
The possibility of this trend continuing or reversing is high, considering the expected assets repricing and portfolio adjustment due to the prevailing high interest rates as the Central Bank of Nigeria (CBN) Monetary Policy Committee hiked the benchmark rate to 27.25%. This happened in the midst of rising inflationary environment, despite the seeming slowdown in July and August as investors seek to hedge against inflation in the face of high MPR. Added to this is the expected quarterly earnings that might come mixed, reflecting the level of uncertainty in the foreign exchange market. The sectors that performed well before now are likely to consolidate and even post better-than-expected Q3 and year-end financials should be the targeted by discerning investors and smart traders.
Nigeria’s equity market is at crossroads now, after recording year-to-date return of 31.81% at the end third quarter, despite policy mismatch and summersaults by the government that had made the ongoing economic reforms seem rather directionless after more than a year of the current administration. The bear-run in the second quarters of 2024 was extended in Q3, showing the correlation between macroeconomic data movement and the market, with the price of crude oil also suffering a decline in Q3, the first time in recent years and quarters. Trading on the NGX in September, maintained its tradition as a month of positioning for the last quarter and year-end, despite the fact that investors would normally seek funds to pay school fees for their children and wards within and outside the shore.
The pressure in the foreign exchange market, rising yields in fixed income market, low liquidity and low participation of foreign investors in the equity market are factors currently increasing profit-taking and selloffs in blue-chip stocks like MTNN, BUA Cement, Nestle Nigeria, Dangote Cement, NNFM, Transcorp Power, Okomu Oil Palm and Julius Berger, among others. Also noteworthy is the fact that the ongoing correction has made dividend yield in the market high.
The month’s rebound was propelled by low valuation, buying interests in the oil and banking sectors, quarter-end window dressing and positioning for the expected Q3 corporate numbers in the new month of October. Despite monetary authorities to hike rates repeatedly thereby making the fixed income market direction unclear for the period under review, as the last quarter of the year comes with seasonality and other factors.
In the month of September the composite NGXASI recovered 1,979.25 basis points, closing at 98,558.79bps from its opening level of 96,579.54bps, representing a 2.05% growth, after touching an intra-month high of 99,175.85bps and a low of 96,068.36 to remain above the 98,000bps psychological line, after breaking through various resistance levels. Market capitalization rose by N1.16 trillion, closing at N56.64tr, from an opening value of N55.48tr, also representing 2.09% value gain.
The gain recorded in September was however not enough, as third-quarter ended with the NGX’s ASI losing 1.50%, following which the market closed 31.81% higher Year-to-Date, boosted by rekindled buying sentiment that gives insight as to what the year 2024 would likely end in the green, in line with INVESTDATA analysts’ projection at the Invest 2024 traders and investors workshop held on December 9, 2023. This outlook was reaffirmed subsequently at different events like the Master classes, as well as the Q & A sessions with Ambrose Omordion that holds every Saturday via Zoom and has continued to record increased participation.
The uptrend recorded in September resulted from buying sentiments, and inflow of funds due to bargain hunting in the midst of portfolio rebalancing and sector rotation ahead of Q3 numbers. Noteworthy is the mixed economic data released within the month by the Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS), which had significant impact on the market, to reflect the weak economic recovery. This was because the data came in as expected, confirming the slow recovery in the economy, just as inflation rate for the month of August recorded a marginal slide to 32.15%, from 33.40% in July, as Q2 GDP figure went up to 3.19% from Q1 2.98%. Also, Nigeria’s Purchasing Manager index (PMI) as released by Stanbic IBTC Bank expanded to 49.9 points in August from 49.2 points in July.
The volatility seen during the period was high on a less than average traded volume that reflected the buy-market and mixed sentiments during the period, resulting in 13 sessions of up market and 7 of bear trading. Traded volume for the month was down by 5.27% to 10.06bn shares, as against the 10.62bn units recorded in the preceding month.
Market breadth for the month was positive as advancers outnumbered decliners in the ratio of 59:43, to halt a two-month bear transition with increasing magnitude in stock prices recovery after pullbacks in the previous months. This was an apparent bargain hunting in undervalued and fairly priced stocks. The buy volume of total transactions for the month was 80%, while sell position stood at 20%, just as volume index for the period was 1.15.
The sectoral index movement table for the period were mixed, with the NGX Banking index leading the advancers after gaining 10.18%, followed by Energy, Pension, Premium, NGX 30, Insurance and Mainboard with 6.97%, 5.95%, 4.49%, 1.99%, 1.36% and 0.88% respectively, whereas the NGX Growth index top the decliners with 11.66% followed by Industrial and Consumer goods with 1.25% and 0.69% respectively.
Sectorial Index Movement In September:
Best Performing Stocks
Source: NSE and Investdata Research
The best performing stock for the month of September was Caverton, which appreciated by 72.86%, galloped on the strength of partnership news and was deflated by misrepresented earnings figures; followed by Regency Insurance’ 66.67% gain; while the share price of Ellah Lakes rose 47.67% on the back of the news of stockbrokers visiting its farms, despite the negative earnings report. Berger Paints chalked 47.55%; and ABC Transport 47.44%; among others.
Worst Performing Stocks
Source: NSE &Investdata Research
On the other hand, the worst performing stock for the period was NNFM, which lost 33.95% of its opening value for the month, due to selloffs and profit taking. Learn Africa Plc followed with 24.53% on price adjustment for bonus shares declared by its board, and profit taking. This was followed by the 23.86% drop in the price of Omatek Ventures; while Cutix shed 21.75% on market forces in the midst of markdown of one new share for everyone held and profit booking.
Chart view of September market
NSE ASI MONTHLY TIME FRAME FOR September (See Opening chart)
From the above chart, you would notice that the NGXASI on monthly basis is resisting a further decline after forming a hammer candlestick pattern in the previous month of August that supports continuation of uptrend or reversal. A breakout of this level and the bullish pattern will create a new entering point for discerning traders and investors. Momentum for the month supports a buying sentiments, whose continuation and reversal in the new month and quarter will depend on market forces and actual performance of the expected corporate Q3 financials. As we cross over to the last quarter of 2024, for which trading will kicks off on Wednesday with likely high hopes that speculators will return to play the market ahead of year-end activities and seasonality.
Market technicals are showing increased positive sentiment with the NGX as performance YTD inched up, as confirmed by the strong support and volatility that associated with uptrend setups and a trend continuation; and critical resistance levels on the NGX highlighted by the multiple technical analysis strategies which suggest that a range of 96,068.36-98,000 is acting as a major support level.
Should the NGXASI stay above the 99,000 level, then we interpret the recovery and trend as strong and healthy enough to support higher prices, after a slight correction or pullback due to likely profit-taking from the recent quarter end window dressing.
Consequently, the pullbacks in the market are likely to reverse, despite the little expected mixed trend that will offer yet another opportunity to jump into the high-flyers and dividend stocks that would drive the recovery of the NGX in the midst of smart money entering the market. There is also the impact of expected mixed Q3 earnings reports and positive economic data, as market players go defensive at this point considering the last quarter activities and momentum.
We see investors focusing on portfolio adjustment and rebalancing by targeting companies with strong potentials to grow their Q3 earnings and dividend on the strength of their earnings capacity as the year enters its last quarter.
Again, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation for the rest of the year.
Also, we want to appreciate all participants and speakers at the Investdata Q4 master class that held over the weekend. We do believe that it was a very refreshing and worthwhile experience for all, as we prepare for robust returns on investment in the final weeks of 2024.
Meanwhile, to navigate the rest of the month profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Mondays, Wednesdays and Fridays. Also get investdata trading CODE to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent range market. Despite the mixed sentiment witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.” To obtain your pack send ‘Yes’ or ‘Stock’ to 08028164085, 08179547605 now.
Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
