Market Update for the Week Ended October 18 and Outlook for October 21-25
For the second week in a row, the Nigerian Exchnage extended its recovery and uptrend in the face of mixed sentiments and negative macroeconomic data as reveraled by the September Consumer Price Index that reversed up, reading 32.7% This was on the strength of positive corporate earnings released so far to the market and ahead of more earnings inflow in the new week and beyond.
Already, Transpower and United Capital Plc released impressive Q3 numbers which elicited positive reactions as expected from investors and traders, giving insight into what their full-year earings potend and the projected final dividends at the end of current financial year.
As more earnings hit the market ahead of the statutory deadline, the benchmark NGX All-Share index closed higher, setting its sights on another monthly advance on the strength of the corporate numbers and market players reaction to these scorecards. Portfolio rebalancing, sector rotation and position taking continued ahead of year-end seasaonality, knowing that Q3 numbers are very important in positioning for peak earnings season in Q1 2025 that comes with dividend announcement. This is especially true of companies that akready surpassed their 2023 full year performance by the 2024 half-year as revealed by their earnings power that support higher payout if the positive trend is sustained in their expected Q3 results. Looking at the index’s 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 entering the market as a result of position taking in expectation of more quarterly results, despite high 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 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 more trigger in form of quarterly finanicals, as NGX index action trades slightly above the T line and the two moving average of 50 SMA and EMA on a weekly time frame. The possibility of continuation of trend is high in the new week depending on market forces as all eyes are on the big names Q3 numbers. The sentiment report for the period revealed a mixed sentiment of 54% buy position and 46% sell volume, as MFI looked up to reads 58.20 points which indicates that funds entered the market for the period. Regardless of the negative market breadth for the week occurred in the midst of position taking and selloffs. 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 dropped sharply to trade at $73.06per barrel following the weak economic data from china, that set worries about demand from the world’s top oil importer in the midst easing of concerns about potential supply distruptions in the middle east region. 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.
Stock markets across the globe witnessed a positive momentum, driven by continued rate cut by ECB, impressive corporate earnings emandating from different domain and sectors. These supported the MSCI world equity index that sustained it positive outing to close higher with 0.4% for the period. As better- than expected earnings and positive economic data from US and Eurozone, as felling inflation rate pave another way for ECB second rate cut, while the Asia markets were in green on strong market expectation of stimulus rollout of $1.7trillion in the midst of Q3 GDP slowing down to 4.6%. In the new week, the expected bullish sentiment to continue on falling inflation rates in EU and US, positive corporate earnings reports and opening opportunities in emerging economies.
Movement Of NGXASI
It was yet another positive week for the NGX, in the midst of mixed performance, with three sessions of down market and two days of green which was enough to close the index higher on a low traded volume and negative market breadth in the face of mixed sentiment during the period.
The week’s trading opened on a positive note, extending the previous gain position as the index closed 0.62% higher on Monday. This trend continued on Tuesday when the market closed 0.33% green. This was halted for the rest of the week with midweek recording decline of 0.25%, while Thursday and Friday were down by 0.21% and 0.01% respectively on profit taking and selloffs, bringing the week’s total gain to 0.48%, compared to the 0.09% positive outing in the previous week.
In all, the composite NGX All-Share Index gained 463.65basis points, closing at 98,070.28bps, from previous week’s 97,606.63bps closing level, after touching an intra-week high of 98,576.72bps from a lows of 97,484.10bps. Market capitalisation jumped to close at N59.4tr, representing a 5.9% appreciation in value, as a result of the listing Aradel Holdings and C & I Leasing additional shares from bonus/debt coversion on NGX during the week and price rally of Transpower on impressive earnings. Despite price adjustment in the shares of UBA and Fidelity Bank for interim dividend of N2.00 and 85 kobo respectively.
The 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 weak and mixed as revealed by volume and market breadth, with losers outnumbering gainers in the ratio of 43:33 on a mixed sentiment as indicated by investdata sentiment report showing 54% ‘buy’ volume and 46% sell position. Money Flow Index was looking up to read 58.20points from the previous week’s 51.80 points, an indication that funds enteted the market on a weekly chart.
Technical View
The NGX index’s action extended its uptrend 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 Insurance and Banking index closed 1.23% and 0.51% lower respectively, while NGX Consumer goods led the advancers after gaining 1.42% followed by Energy and Industrial goods with 1.08% and 0.04% respectively.
Activities in volume and value were mixed, as players exchanged 1.45bn shares worth N73.89bn, compared to previous week’s 2.97bn units valued at N31.51bn. Volume was driven by Financial Services, services, Oil/Gas and Services industry, boosted specifically by Japaul Gold, UBA, Zenith Bank, Aradel and Oando.
Transpower Plc and Mecure Industries were the best performing stocks during the week, gaining 19.29% and 18.81% respectively, closing at N359.90 and N12.00 per share on impressive Q3 numbers and market forces. On the flip side, Regency Assurance and Tripple Gee lost 15.28% and 14.93% respectively, at N0.61 and N1.71 per share, on selloffs and profit taking.
Outlook for the week
We expect the mixed sentiment to continue on bargain hunting and sector rotation, as 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
