Caution At NGX, Ahead Of Electoral Tribunal Ruling, As Pullbacks Offer Fresh Opportunities

Market Update for September 5

Trading activities on the Nigerian Exchange on Tuesday was a mixture of profit taking and buying interests in some highly priced stocks and blue chip companies, particularly following the recent price appreciation in BUA Foods, Dangote Sugar, and MTNN among others, despite which the benchmark NGX All-Share index closed marginally higher on a very high traded volume and flat market breadth. The index therefore, extended its bullish momentum for the fourth consecutive session to form a bearish hammer pattern that signals a reversal, which requires confirmation at the midweek’s session. Meanwhile, all eyes are on the Treasure Bills primary market auction, which coincides with the day the Presidential Election Petition Tribunal has set aside to deliver judgement on the suit filed by Peoples Democratic Party and Labour Party challenging the victory and subsequent swearing in of Bola Ahmed Tinubu, Presidential candidate of the ruling All Progressives Congress (APC) in the 2023 general elections. This is also as investors await the audited half-year scorecards of the remaining first-tier banks, amidst seeming profit taking and selloffs that hit financial services stocks.
As shown by the historical data of the NGX, the month of September has remained an up market for seven years, closing negative thrice, thereby offering investors an insight into what the month looks like. We however acknowledge that the prevailing economic situation and trading environment are changing due to the ongoing government reforms and improved market fundamentals. The mixed market metrics witnessed on the exchange was attributed to cautious trading, despite the impressive performance of the banking sector and expected interim dividend announcement from AXA Mansard and Consolidated Hallmark Insurance Plc.
Also, despite the increasing demand for consumer and industrial goods in the market, players should trade with caution while positioning, but target companies in the services industry with strong fundamentals and earnings power capable of supporting price and higher dividend payment at the end of the year. These are against the backdrop of the changing market conditions and trading environment due to macroeconomic headwinds, mixed corporate earnings and the prevailing yield in alternative market with rates and yields outlook remaining mixed due to rising inflation, high interest rate and exchange rate problem as a result of the high volatility in the exchange.
The NGX All-Share index still traded above the 68,000 basis points mark, heading towards the 1984 threshold of 70,000bps on improved transactions in volume and mixed sentiment. The candlestick formation at the end of Tuesday’s session signaled a top reversal pattern as the 2008 resistance level turn support to reveal a markup phase. Also, the market continues to interpret and digest the latest news about Oando’s acquisition of the entire shareholding of Agip’s assets and the planned delisting of PZ Cussons announced on the Exchange ahead of its expected full-year audited financial s for May 30, 2023.
However, this is the time to buy into value stocks with strong fundamentals, as the market looks forward to a favourable news that will support this buying interest that resurfaced. Also noteworthy is the mixed outlook in the fixed income market yields and rates, amidst portfolio repositioning and sector rotation on the strength of company earnings’ power. It is therefore time to use technical tools, if you have been ignoring charts and fighting the trends, it is your chance to step up your game. It is pertinent to stress the fact that profit taking is part of market dynamics, which can occur at any time, as we look forward to a mixed outing and intermittent profit taking, since policy factors that pushed the market up are shaking, as market wait for favorable news and statements from the minsters.
To navigate the rest of the quarter and year profitably using fundamental and technical analysis, join investdata’s 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 selloffs. Despite the mixed volume pattern witnessed in recent days, it is time to shop for undervalued stocks, sector rotation, go for defensive stocks at the next insider playing opportunity.
Oil price oscillation continued, as it rebounded sharply to trade at $89.91 per barrel in the midst of oil production cut and weak global demand as Chinses weak economic dampen sentiments. The Russia-Ukraine war remains a major concern, the prevailing high interest rate regime and slowing inflation. Also, supply tightened due to the Russia-Ukraine conflict that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Meanwhile, Tuesday’s trading started in the upside and was sustained, despite oscillating for the rest of the session on profit taking and positioning in blue chip stocks. This situation pushed the Index to an intraday high of 68,457.10bps from its lows of 68,119.50bps, before closing above the opening figure at 68,334,70bps.
Market technicals were mixed and flat with a lower volume traded when compared to the previous session in the midst of breadth at par on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 64% buy position and 36% sell volume. The total transaction volume index stood at 1.24 points, just as the momentum behind the day’s performance was strong, with Money Flow Index reading 80.16pts, from the previous day’s 74.63pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Tuesday trading, the key performance NGXASI inched up 55.54bps, closing at 68,334,68bps, from its 68,279.14bps opening level, representing a 0.10% up. Market capitalization also rose by N39,4bn to N37.40tr, from the previous day’s N37.37tr, which also represented a 0.1% value gain.
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Tuesday’s upturn was driven by buying interests in the shares of MTNN, Dangote Sugar, BUA Foods, Beta Glass, International Breweries, Cutx, and Oando, among others. This impacted mildly on Year-To-Date gain which increased to 33.33%, while Market Capitalization YTD gain stood at N8.43tr, representing a 34.88% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed after the NGX Banking and Insurance closed lower by 0.60% and 0.11% respectively, while the NGX Consumer goods led the advancers after gaining 1.98%, followed by Industrial goods with 0.03%. Just as NGX Energy closed flat.
Market breadth was at par as gainers were equal losers in the ratio of 30:30, while activities in volume and value were done after market players exchanged 557.75m shares worth N10.21bn, driven by trades in UBA, Oando, Fidelity Bank, Accesscorp and Transcorp.
Beta Glass and Multiverse were the best performing stocks, gaining 10% each, closing at N42.90 and N2.97 per share each, on market forces. On the flip side, NSL Tech and Ikeja Hotel lost 10% and 9.68% respectively, closing at N0.27 and N2.80 per share, purely on the back of profit taking.

Market Outlook
We expect the mixed momentum to continue ahead of the expected half-year earnings reports of UBA, Accesscorp and Zenith Bank in the midst of bargain hunting and mixed outlook for money market yields ahead of midweek TB primary market auction and sector rotation persists.
However, pullbacks are creating buying opportunities amidst the economic reforms of the government, just as more policy pronouncements and economic managers hit the ground running, a situation expected to offer investment direction eventually.
We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price rally to take profit, while also looking at the trends and events across the globe and domestically.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605