Market Update for October 19
The selling pressure on the Nigerian Exchange continued at the midweek as highly capitalized stocks again further dragged the market lower on a low traded volume and slightly negative breadth in the midst of expectations of more corporate earnings. There is also the effect of continued sector rotation as end year of the year seasonality draw closer as investors search for value to hedge against the bear market and inflationary environment.
The NGX earning reporting season kicked off last Friday and is expected to extend to four or five weeks as investors react to surprises and disappointments that comes with the earnings season. Over the next weeks, most major companies will provide the market with updates on profits and give an outlook for the rest of the year. At the conference calls CEOs are expected to speak on the state of their business, and what are of particular interest to traders- the general economic environment.
Stock trading and investing, depends on the underlying economic situation. But a company’s performance are also the main drivers of fund flows between different stocks as they buy for future earnings and payout. The forex market problem today, is affecting investments and repatriate profits by investors. Central bank and government respond to economic conditions faced by businesses and investors, which also impacts their investment decision at any time. It is time for monetary and fiscal authorities to shake hand to address this issue and save the economy from any recession.
The composite NGX All-Share index’s action has broken down yet another psychological line of 45,000 basis points on selloffs the continued selloff in telecommunication giants- Airtel and MTNN, amid portfolio realignments in the hope of more corporate earnings inflow.
Here, understanding the big picture and the outlook of the expected financial reports of the companies in this changing business and economic environment across the globe and locally will help market players reposition their portfolios on the strength of the 11 sectors of the market performance and sentiment rank from strongest to weakest right now. Meanwhile, bargain hunters are capitalizing on the persisting low valuation and divergence from real value in expectation of closing gap in the future dates for profit and gains.
In the current market situation, traders or investors need to up their game, by understanding the power of perception or sentiments cannot be overemphasized in stock trading or investing, seeing the impact of aggressive hawkish monetary policy across the globe, with investors reacting to US September Consumer price index report released yesterday. The UK experience, coming after the World Bank and IMF’s continued warning that the central banks should rethink and avoid pushing the global economy into yet another recession. We see that is already happening in UK, China, Japan and others. It is time for the Nigerian central bank and its Monetary Policy Committee to have a rethink before things go further out of hand.
Despite the lingering high interest rates atmosphere, rising inflation and slowing industrial output as a result of policy changes and uncertainty around the globe, there are sectors, industries and individual stocks still seeing positive activities from traders and investors. There are equity players should pay attention to, as the correction in the NGX index action creates buying opportunities in some sectors and individual defensive stocks with high dividend high yield and positive earnings growth.
At this point in the market, trade what you are seeing by staying in the right side of the market and looking at price action, momentum, market timing and forecast to boost your trading results in any market situation. So, the volume pattern and index structure in recent sessions show position taking, while funds enter some stocks as revealed by money flow index which need to be confirmed, especially as mixed sentiment supported the previous session candlestick formation.
To navigate the rest of the month profitably using fundamental and technical analysis to run, join investdata live sessions at noon every trading day “and also get investdata 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 range market. Despite the mixed sentiment witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”
Oil prices sustained its oscillation to trade at $93.37, in the midst of renewed confidence on UK fiscal update and new direction of the government to foster country financial stability. Despite fear of global recession and supply tighten due to Russia Ukraine war that are getting worst. Coupled with the impact of hawkish monetary policy by central banks, just as China COVID-19 lockdown come to an end. The up and down movement of oil price also continues to drive volatility in the face of rising interest rates and inflation. Despite the bailout package of the Chinese government to simulate economic activates and stable employment, as well as that of Germany aimed at managing the energy crisis.
Midweek’s trading started in the green but reversed and pulled back sharply on selloffs in highly priced equities, despite the buying interests in the banking stocks and other blue chip companies. This pushed the NGX’s index to an intraday low of 44,302.34bps from its highs of 45,505.24bps before closing below its opening level at 44,318.15bps.
Market technicals were weak and mixed, with lower volume of trade than the previous session in the midst of breadth favouring the bears on a selling pressure as revealed by Investdata’s Sentiments Report showing 1% buy position and 99% sell volume. The total transaction volume index stood at 1.03points, just as impetus behind the day’s performance was weak as Money Flow Index is looking down at 20.56pts, from the previous day’s 28.49pts, indicating that funds left the market.
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Index and Market Caps
At the end of the day trading, the NGXASI fell by 1,048.17bps, closing at 44.318.15bps, after opening at 45,366.32bps, representing a 2.31% decline, just as market capitalization fell by N570.91bn closing at N24.14tr, from the previous day’s N24.71tr, which also represented a 2.31% value loss.
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The session downturn was driven by selloffs and profit taking in Airtel, MTNN, Lafarge, Conoil, MRS Oil, Total, GTCO, UBA, Dangote Sugar and CWG, among others which impacted negatively on Year-To-Date gain, reducing it to 3.75%. Market capitalization YTD gain fell to N876bn, representing a 11.01% rise over the opening level for the year.
Mixed Sector Indices
Sectorial performance indexes were mixed, with the NGX Consumer goods and Energy closing 0.03% and 0.80% lower espectively, while NGX Industrial goods led the advancers after gaining 0.94%, followed by Banking and Insurance with 0.50% and 0.24% respectively.
Market breadth turned negative, as losers outpaced gainers in the ratio of 17:16; just as activities in volume and value were mixed, as players exchanged 165.35m shares worth N3.67bn. Volume was driven by trades in FBNH, GTCO, Sterling Bank, Chams and Zenith Bank.
Fidelity Bank and Jaiz Bank were the best-performing stocks, gaining 9.74% and 7.06% respectively, closing at N3.83 and N0.91 per share respectively on positive earnings and market forces. On the flip side, Airtel Africa and MRS Oil lost 10% and 9.76%, closing at N1,312.20 and N12.95 per share, purely on selloffs.
We expect mixed sentiments to continue on reaction to earnings release so far and bargain hunters are taking advantage of the low prices to reposition ahead of more Q3 corporate earnings. This is just as banking stocks are gaining attention, despite profit taking that makes the sector more attractive for income investors, while portfolio rebalancing continues on bargain hunting in the midst of the worsening sovereign risks.
We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists. Analysts are also focused on the lookout for August CPI and flow of funds amid oil prices oscillation.
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