Market Update for the Week Ended October 11 and Outlook for October 14-18
Nigeria’s equity market had modest rally last week in the midst of continued portfolio repositioning, profit taking and selloffs of highly priced stocks ahead the September quarterly earnings reports and consumer price index for the period expected to reveal the true state of listed companies and the economy at large. These also are expected to give market direction. Already, Geregu Power reported impressive Q3 numbers to kickoff the earnings reporting season on the exchange while at same time offering an insight into what the market should expect from its sector, on the back of the impact of increased power tariff which has reflected on its bottom line during the quarter.
As the earnings reporting season gets underway in earnest this week, the NGX All-Share index halted previous week’s lost position, closing slightly in the green to set its sights on another monthly advance on the strength of the corporate numbers expected. This is also the impact of position taking during the season ahead of year end seasaonality, knowing that Q3 numbers are very important as it offer insight into what to expect at the end of current financial year end in term of likely payout. This is especially true of companies that had beat their 2023 full year performamce in their 2024 half year earnings reports as revealed by their earnings power that supports higher payout if the positive trend is sustained in their expected Q3 results. Looking at the index action and candlestick formation on a multiple time frame indicates the possibility of trend continuation or reversal which depends on market forces in the new week.
All eyes are still on the changing market and economic fundamentals across the globe in the face of geopolitical tension and domestic economic hardship and insecurity, as fiscal and monetary authorities had failed to shake hand in addressing the nation’s lingering hyperinflation and exchange market challenges, especially with insecurity becoming order of the day at all levels. This is the time to chart a new course for the nation’s economy and progress by changing the nation economic managers and policy formulation process to give hope again, because policies summersualts and inconsistent statement of the so called economic managers are killing confidence of Nigerians today.
The NGX’s remained relatively strong and recovery in the midst of funds leaving the market as a result of cyclical flow of fund on the back of higher fixed income market yields and mixed sentiments. A better understanding of the big picture of the market and our actions as market players in any market cycle would determine your results or returns ultimately. So, positioning in the right stocks, sectors and industry at the right time in this season of volalility that comes with last quarter sentiment and seasonality makes the difference.
Technically, the market is mixed and oscilating, waiting for a trigger, even as NGX index action is trading flat on the T line on a weekly chart and above 50 SMA and EMA for week under review. The possibility of continuation of trend is high in the new week depending on market forces as all eyes are September inflation report from NBS and quoted companies quarterly results. The sentiment report for the period revealed a mixed sentiment of 49% buy position and 51% sell volume, as MFI looked down to reads 51.80 points which indicates that funds left the market for the period. The negative market internals for the week occurred in the midst of selloffs and position taking. As portfolio rebalancing persisted, while bargain hunters took advantage of pullbacks to buy into fundamentally sound companies with high yield, strong earnings power and low valuation that revealed high upside potentials.
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Oil prices for the week rose, trading at $79.02per barrel following the rising geopolitical tensions in the middle east region and fear of attack on the region’s oil fields that could lead to supply disruption in the midst torpical issues and oscilating US inventory. As ongoing conflict in the middle East and war in Ukraine and Russia disrupting oil output in the face of major central banks of the world cutting rates to trigger economic expansion across the globe. The up and down movement of oil price has continues to drive volatility across different investment windows and inflation that is slowing down in mature economies.
Global stock markets witnessed a positive outing over the past week, driven by easing inflation and rate cut expectations. The positive macroeconomic numbers and impressive corporate earnings supported the MSCI world equity index that closed higher by 0.9% for the week. As the economic data indicates the continuation of rate cut by the Fed in the next policy meeting coming up in November. Strong corporate releases from Eurozone, Asia and other markets weighed on world equity index positively. In the new week, the expected Eurozone consumer price index, ECB decision, corporate earnings reports and geopolitical politics will shape global equities market.
Movement Of NGXASI
The NGX witnessed a slight rebound for the week, in the face of mixed performance, recording three sessions of down market and two days of positive outing to close higher on a low traded volume and negative market breadth in the face of mixed sentiment during the period.
Trading for the week started on a positive note, extending the previous gain position as the index close higher by 0.19% on Monday, this trend was shortlived on Tuesday when the market pulled back by 0.12%, which was sustained at the midweek and Thursday on profit taking and selloffs as the index slide by 0.10% and 0.01% respectively, but rebounded on Friday as the benchmark index gained 0.13%, bringing the week’s total gain to 0.09%, compared to the 0.95% lost in the previous week.
Consequently, the composite NGX All-Share Index inched up by 86.09basis points, closing at 97,606.63bps, from previous week’s 96,520.54bps closing level, after touching an intra-week high of 98,232.39bps from a lows of 97,064.42bps. Market capitalisation rose by N50bn to close at N56.09tr, representing a 0.9% value gain. Despite price adjustment in the shares of Regency Assurance, Tripple Gee and NPF Microfinance for bonus shares of 4 new ordinary shares for every 5 shares held, one new share for every one held and 12 kobo dividend respectively.
The week’s advancers’ table was dominated by medium and low priced stocks in the midst of mixed sentiment of selloffs and buying interest ahead of more corporate earnings reports. Also notable was the fact that market players were taking advantage of the pullbacks to reposition their portfolios and carrying out sector rotation.
Market technicals for the period were negative and mixed as revealed by volume and market breadth, with losers outnumbering gainers in the ratio of 52:29 on a mixed sentiment as indicated by investdata sentiment report showing 49% ‘buy’ volume and 51% sell position. Money Flow Index was looking down to read 51.80points from the previous week’s 57.41 points, an indication that funds exited the market on a weekly time frame.
Technical View
The NGX index’s action rebounded to signal trend reversal or continuation, which needs confirmation in the new week, as all eyes are on more financial reports and, as well as consumer price index reports that are expected to hit the the market in the face of changing momentum and sentiment, especially from the companies in the banking, insurance, agribusiness, services, oil and gas sectors. Mixed sentiment hit some blue chip companies in the face of low valuation and high upside potential.
Mixed Sectoral Indices
The sectoral indexes of the week were mixed, as NGX Consumer and Industria goods index closed 1.25% and 0.13% lower respectively, while NGX Oil/Gas led the advancers after gaining 1.57% followed by Banking and Insurance with 0.48% and 0.08% respectively.
Transactions in volume and value were mixed, as players exchanged 2.97bn shares worth N31.511bn, compared to previous week’s 2.87bn units valued at N132.81bn. Volume was driven by Financial Services, services industry and Agriculture industry, boosted specifically by Tantalizer, Wapic Insurance, Fidelity Bank, UBA and Transcorp.
Mecure Industries and University Press were the best performing stocks during the week, gaining 19.53% and 17.51% respectively, closing at N10.10 and N2.55 per share on market forces and sentiment. On the flip side, Triple Gee and Daar Communications lost 59.56% and 25% respectively, at N2.01 and N0.57 per share, on bonus adjustment and profit taking.
Outlook for the week
We expect the mixed sentiment to continue on bargain hunting and sector rotation. Also, the listing of Aradel Holdings and expectation of more corporate earnings reports to hit the market in the face of portfolio rebalancing. As players take advantage of pullbacks to buy into value stocks. As investors are watching with rapt attention.
However, retracement to the 96,000bps level and below is possible on correction as global and domestic events unfold.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
