Market Update for the Week Ended November 1 and Outlook for November 4-8
The last trading week of October on the Nigerian Exchange witnessed a bearish momentum and downtrend to reverse the three previous weeks of bull transition and recovery at the peak of earnings reporting season where corporate numbers beat market expectations giving insights as to what market players should look forward to at year-end.
The “Year Ending in 5” effect has been a powerful historical trend that makes 2025 a different year. This phenomenon is one of the most consistent in the stock market and has been evident for decades. The NGX has just crossed over to one of the great months on the exchange, as sector rotation and portfolio rebalancing continued in November on the strength of the recent scorecards and expected macroeconomic data ahead of CBN policy meeting.
As discerning investors and smart traders digest the quarterly numbers to project full-year earnings that portends the likely final dividends at the end of the 2024 financial year. With the expected reaction to these impressive earnings in the midst of year-end seasonality and patterns, knowing that Q3 numbers are very important in positioning for dividend and capital gain against the full-year audited earnings season in Q1 2025 that comes with cash dividend or bonus shares announcement. This is especially true of companies that already surpassed their 2023 full-year performance, as revealed by their earnings power at the end of Q3.
Looking at the index’s action and candlestick formation on a multiple time frame indicates the possibility of trend continuation or reversal which is a function of market forces and sentiment in the new week.
The first trading session of November started on a negative outing in the face of changing market and economic fundamentals across the globe, especially geopolitical tension, domestic economic hardship and insecurity that continue to reflect on the macroeconomic indices. The mismatch in fiscal and monetary policies had failed to address Nigeria’s lingering hyperinflation and exchange market challenges, especially with the rising cost of living and doing business.
However, this is the time to chart a new course for the nation’s economy, 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.
The NGX’s turned weak, sliding as funds left the market amid the influx of quarterly earnings that continues to hit the exchange with impressive numbers. The pullbacks and fundamentals of the various companies reveal inherent value, as price feeds on earnings in the short to long-run. So, a better understanding of the big picture of the market and our actions as market players in any market cycle would determine your returns ultimately, hence the need to position in the right stocks, sectors and industry at the right time in this season of volatility that comes with last quarter sentiment and seasonality makes the difference.
Technically, the market has pulled back, waiting for a trigger as investors react to the recent financials, as the NGX index action trades below the T line and above the two moving average of 50 SMA and EMA on a weekly time frame. The possibility of reversal in trend is high in the new week depending on market forces as players interpreat the numbers and take action. The sentiment report for the period revealed a selling sentiment of 83% sell position and 17% buy volume, as MFI looked slightly down to reads 57.06 points which indicates that funds left the market for the period. As reflected in the negative market breadth for the week occurred in the midst of selloffs. As portfolio rebalancing persisted, while bargain hunters looking to take advantage of pullbacks to buy into fundamentally sound companies with high yield, strong earnings power and low valuation that revealed high upside potentials.
To navigate the rest of Q4 market volatility and its mixed outlook profitably using fundamental and technical analyses to run, join Investdata’s Live Sessions at noon every Monday, Wednesday and Friday. Also, get investdata’s Technical Toolbox 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 corrections and pullbacks to continue the accumulation phase. As volume of transaction witnessed within the week remain low, it is time to go shopping for undervalued stocks, sector rotation and the next insider dealing opportunity.
Oil prices for the week dropped to trade at $71.27per barrel following uptick in US inventory and mixed economic data in advance economies, that set worries about demand even as stimulus packages are being push to trigger increased economic activities in the midst of 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.
The global stock markets witnessed influx of earnings with mixed numbers from tech companies that weighed on stock prices to close lower ahead of US elections and fed policy. As MSCI world equity index had a negative outing to pulled back with 1.2% for the period. In the new week and month, we expect trading activities to be volailite, due to US elections, expectation of clear direction of China stimulus plans and outcome of policy meeting of Fed to shape sentiments across markets.
Movement Of NGXASI
It was a bearish week for the NGX in the midst of busy earnings, with the market recording straight five days of down market on a very high traded volume and negative market breadth in the face of selling sentiment during the period.
Trading for the week started on a negative note, halting the previous gain when the index closed 0.74% lower on Monday. This trend continued on Tuesday when the market another lost 0.66%. The selloffs in high cap stocks and profit taking in others were sustained at midweek, Thursday and Friday recorded decline of 0.04%, 0.38% and 0.22% respectively. This brought the week’s total loss to 2.03%, compared to the 1.41% positive outing in the previous week.
Consequently, the benchmark NGX All-Share Index shed 2,016.89 basis points, closing at 97,432.02bps, from previous week’s 99,448.91bps closing level, after touching an intra-week low of 96,995.46bps from a highs of 99,583.14bps. Market capitalisation fell by N1.22tr to close at N59.04tr from N60.26tr which represented 2.03% value loss. This notwithstanding, the relisting of 10.16bn shares of Transnational Company of Nigeria Plc (Transcorp Plc) at N44.20, after the share reconstruction exercise of one new share for every four units previously held.
The advancers’ table was dominated by medium and low priced stocks in the midst of selling sentiment and portfolio reshuffling ahead of more corporate earnings reports. Also notable was the fact that market players were digesting the corporate numbers to take advantage of the pullbacks to reposition their portfolios and carrying out sector rotation.
Market technicals for the period were weak and mixed as revealed by volume and market breadth, with losers outnumbering gainers in the ratio of 45:39 on a selling sentiment as indicated by investdata sentiment report showing 83% ‘sell’ volume and 17% buy position. Money Flow Index was looking down to read 57.06points from the previous week’s 57.25 points, an indication that funds exited the market on a weekly chart.
Technical View
The NGX index’s action halted its uptrend and recovery, pulling back to signal weakness ahead of the first full trading week of November, after many stocks finished lower following a volatile sessions. Reversal or continuation of trend at this points depends on market forces and sentiment in the new week, as all eyes are on consumer price index reports for October. As sector rotation continue on the strength of numbers from the banking, insurance, agribusiness, services, oil and gas sectors. selling sentiment hit some blue chip companies in the face of low valuation that revealed high upside potential.
Mixed Sectoral Indices
The sectoral indexes of the week were mixed as the NGX Energy and Banking index closed 1.15% and 0.19% higher respectively, while NGX Industrial goods led the decliners after losing 3.70% followed by Insurance and Consumer goods with 0.40% and 0.22% respectively.
Transactions in volume and value were mixed, as players exchanged 2.72bn shares worth N54.63bn, compared to previous week’s 2.14bn units valued at N85.95bn. Volume was driven by Financial Services, ICT and Conglomerates industry, boosted specifically by Fidelity Bank, Chams, UBA, Zenith Bank and Aradel.
Transcorp and Eunisell were the best performing stocks during the week, gaining 314.03% and 60.57% respectively, closing at N45.75 and N5.62 per share on share reconstruction and market forces. On the flip side, Aradel Holdings and Caverton lost 25.75% and 20% respectively, at N445.60 and N2.00 per share, on selloffs and profit taking.
Outlook for the week
We expect a rebound on mixed sentiment and bargain hunting, as investors digest corporate earnings in the face sector rotation and 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
