Market Update for the Week Ended September 13 and Outlook for September 16-20
Trading activities on the Nigerian Exchange (NGX) recorded a positive outing in the second week of September, wiping out previous week’s loss, on increased buying interests amid impressive half-year earnings from interim dividend paying banks. Investors are also conscious of the raging inflation across the country as shown by the rising prices of goods and services. Since the coming inflation report and other macroeconomic indices will determine the rate decision at the CBN policy meeting. Rates and yields in the fixed income market have moderated, especially the TB primary market auction now on the decline across all tenors over the past three consecutive auctions. This is expected to trigger a flow of funds into the equity space as portfolio rebalancing persists.
The major central banks of the world gradually winding down the rate hike cycle with the hope of boosting economic activities again. The global stock market rallied amidst key positive economic data and hope of a rates cut by the Feds at it next policy meeting. The latest US inflation figure strengthened market expectations of rates cut, even when some are looking forward to 25 basis points or 50bps. In the new week, it is expected that the bullish momentum will continue on rate cut by Feds, with the Bank of England following the same pattern.
Back home, the bullish outing was driven by position taking across major sectors of the market and blue chip stocks, a situation that impacted positively on the composite NGX All Share Index which closed higher. Traded volume was above average, while market internals were positive to halt the negative opening of September. However, the remaining half of the month looks dicey and may create opportunities for portfolio rebalancing and positioning for the last quarter of the year. Looking at price action and candlestick formation on a multiple time frame indicates possibility of trend continuation or reversal which depends on market forces in the new week.
All eyes are still on changing fundamentals in the oil and gas sector of the Nigerian economy, with government’s announcing its NNPCL as off-taker of premium motor spirit (petrol) from the Dangote Petroleum Refinery. This should offer an opportunity for the government to rethink its policies around energy, oil and gas enabler of production and economic growth momentum and ahead of seasonality in the coming month and quarter. This is where the country’s fiscal and monetary authorities must have a hand shake to address the lingering hyperinflation challenge, especially with the unabating insecurity already a priority of government at all levels. This is the time to chart a new course for the nation’s economy and progress.
The NGX’s recovery and uptrend last week were due to buying interests and the circular flow of funds on the back of the moderating fixed income yield environment and expected end of the quarter window dressing. It is noteworthy that position taking has also continued in banking stocks, among others a situation that has supported the market.
Since every investment is against the future expectation, government policies, company information, macroeconomic data and others that influence prices in the short to long-term should guide your investment decisions as you follow the trends and changes in the market. 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.
Technically, the market is on the recovery path, as the NGX index’s action is set to breakout the T line on a weekly chart, trading above the 50 SMA and EMA for same period. The possibility of a continuation of trend is high in the new week. Sentiment report for the period revealed a buying pressure of 100% buy position and sell volume of 0% as MFI looked up slightly to reads 57.15 points which indicates that funds entered the market during the week. The positive market breadth for the period occurred in the midst of accumulation and profit taking. As bargain hunters took advantage of pullbacks to buy into fundamentally sound companies with high yield, strong earnings power and low valuation.
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Oil price during week rebounded to trade at $72.14per barrel following the net length due to weak financial demand for oil that dropped to its lowesr point in history. All these in the midst of OPEC delaying output hike and ongoing conflict in the middle East. As increasing geopolitical tensions around the world threats supply, coupled with ongoing war in Ukraine and Russia disrupting oil output in the face of Fed likely to cut rates in their next policy meeting. 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.
Movement Of NGXASI
The NGX witnessed a rebound during the week when the bulls dominated trades in the face of mixed performance, following which there were three sessions of up market and two negative outings. The index closed higher on an above average traded volume and positive market internals in the face of buying sentiment during the period.
The week’s trading started on a negative note, halting the previous gain position as the index close lower by 0.24% on Monday, this trend was short-lived on Tuesday when the market rebounded by 0.62%, before reversing by the midweek on profit taking and selling sentiment. The benchmark index, however, dropped 0.09%, followed another reversal on Thursday when the NGXASI chalked 0.32% on position taking in MTNN and others. The market sustained this on Friday when the index gained 0.44%, raising the week’s total gain to 1.06%, compared to the 0.15% loss in the previous week.
Subsequently, the benchmark NGX All-Share Index garnered 1,023.09basis points, closing at 97,456.62bps, from previous week’s 96,433.53bps closing level, after touching an intra-week high of 97,460.08bps from a lows of 96,068.36bps. Market capitalisation rose by N708bn, closing at N56tr, representing a 1.10% appreciation in value. The difference between the index and market cap resulted from the listing of additional eight billion shares in favour of Japaul Gold, from private placement at N2.50 per share. Also, the share price of Learn Africa and sovereign Trust Insurance were adjusetd for a bonus of one new share for eight share held and 3 kobo dividend respectively.
The week’s advancers’ table was dominated by medium and low priced stocks in the midst of buying sentiment in growth and undervalue stocks ahead of more banking results hitting the market and inflation data. 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 position and strong as revealed by volume and market breadth, with gainers outnumbering losers in the ratio of 52:31 on a buying pressure as indicated by investdata sentiment report showing 100% ‘buy’ volume and 0% sell position. Money Flow Index was inched up at 57.15 points from the previous week’s 56.17 points, an indication that funds entered the market on a weekly time frame.
Technical View
The NGX index’s action at the end of the week rebounded, signaling the possibility of a trend reversal or continuation, which needs to be confirmed in the new week, as all eyes are on the inflow of more earning reports from the remaining dividend paying banks. This is in addition to macroeconomic reports expected to hit the market in the face of changing momentum and sentiment, especially from oil and gas companies. Buying interest hit some blue-chip companies in the face of low valuation and interpretation of decline in TB auction rates, even when higher yields in the alternative market still remain below inflation rate.
Bullish Sectoral Indices
The sectoral indexes closed the week in the green, led by the NGX Banking index that gained 5.12%, followed by Energy, Insurance, Consumer and Industrial goods with 2.00%, 1.59%, 1.47% and 0.17% respectively.
Activities in volume and value were mixed, as players exchanged 2.58bn shares worth N51.21bn, compared to previous week’s 2.14bn units valued at N51.22bn. Volume was driven by Financial Services, Oil/Gas industry and Services industry, boosted specifically by Jaiz Bank, Zenith Bank, Japaul Gold, Accesscorp and Transcorp.
Caverton and RT Briscoe were the best performing stocks during the week, gaining 59.75% and 42.02% respectively, closing at N2.54 and N3.65 per share on market forces and sentiment. On the flip side, Learn Africa and Julius Berger lost 22.15% and 17.89% respectively, at N3.62 and N140.00 per share, on bonus adjustment and profit taking.
Outlook for the week
We expect a mixed sentiment to continue on bargain hunting and sector rotation. Also, as more banks earnings reports are likely to hit the market in the face of portfolio rebalancing. As players take advantage of pullbacks to buy into value stocks ahead of CBN policy meeting. 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.
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