Caution Still As Traders, Investors Bet On Sept CPI, Q3 Earnings, Seek Policy Direction

Market Update for October 12

Trading activities on the Nigerian Exchange on Thursday closed marginally higher to sustained the previous gains, even as the NGX continued its sideways movement to remain on the consolidation range amid the low traded volume and positive market breadth. All eyes are still on the September consumer price index and Q3 corporate earnings reports to help investors and traders ascertain the true position of the economy.
Amid policy somersaults and the clear lack of proper preparation before any policy adjustment and pronouncements is dampening confidence and market momentum as to where the fiscal and monetary authorities are headed. On Thursday, the Central Bank of Nigeria lifted the embargo on 43 items disqualified from accessing forex from its official window before now, even while the problem of supply in the FX market and backlogs thereon are yet to be addressed. However, we believe the government and monetary authority will do the needful very soon as consultation is ongoing to fix this issue of continued devaluation of the Naira, and availability of fx to drive the much needed industrialization.
Market players continue to take advantage of the ongoing oscillation and pullbacks in some major sectors of the market to reposition their portfolios as earnings reporting season draw closer. Also, just as the market awaits positive catalysts in the form of policy statements from economic managers to boost confidence and perception. As the ongoing decline in fixed income market rates and yields in the midst rising inflation, had gradually triggered flow of funds into equity space as demand for banking stocks and others are looking up ahead of their Q3 financials.
The increasing geopolitical tension will continue to drive global and domestic market volatility, so investors and traders anywhere in the world should factor in this uncertainty in their trading and investment plans always. The NGX index’s action still within its consolidation range to trade above the T-line. More companies continue to announce their closed period for Q3 financials which are expected to start pouring in, any moment from next week for early filers. The index’s action stayed flat after the previous session rebound.
Amid raging concerns over macroeconomic headwinds in the country today, Q3 earnings expectation, there other concerns such as the mixed outlook in fixed income yields as bond market remain bearish, with the Naira crossing the N1,000/US Dollar threshold, rising inflation among others. Owing to the cautious environment pervading the nation’s equity market, it is important that you trade and invest wisely ahead of events and factors that will shape the market in this last quarter of this year. Despite the mixed sentiment witnessed so far, the market’s big uptrend remains intact at above the 50-Day Moving Average, despite testing it in the midst of a material shift in the index and the ongoing volatility.
Despite the seeming rebound recorded on the NGX at the end midweek trading, investors should trade consumer and industrial goods stocks with caution, while repositioning portfolios, targeting services industry stocks with strong fundamentals and earnings power capable of supporting price, and higher dividends payment at the end of the year.
However, the two consecutive decline in Treasury Bill primary market auction rates or yields may trigger more flow of funds into equity space, as all the tenor yields drop to 3.67%, 5.11% and 9.25% respectively for 91days, 182 days and 364 days. The candlestick formation at the end of the session signals a bearish top pattern that supports downtrend, but needs to confirm as the market opens today, just as the 2008 resistance level turned another strong support level to watch.
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Oil price oscillation continued, as it rebounded again to trade at $87.32 per barrel in the midst middle east conflict and inventory builds. As the world leaders move to contain the crises. Just as inflation waves that may affect crude demand. The Russia-Ukraine war which has lingered for over a year 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.
Thursday’s trading started slightly green, and was sustained for the rest of the session, despite oscillating on position taking in banking stocks and others, while selloffs hits some others, a situation that pushed the Index to an intraday high of 67,152.93bps from its lows of 67.100.49ps, before closing slightly above its opening figure at 67,133.19bps.
Trading metrics were positive and mixed with a lower volume traded, when compared to the previous session, in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 62% buy position and 38% sell volume. The total transaction volume index stood at 0.60 points, just as the impetus behind the day’s performance was weak, with Money Flow Index reading 30.461pts, from the previous day’s 38.90pts, indicating that funds left the market. Despite the market close slightly higher.
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Index and Market Caps
The benchmark NGXASI, at the end of Thursday trading, inched up 32.70bps, closing at 67,133.19bps, from its 67,100.49bps opening level, representing a 0.05% up. Market capitalization also rose by N18bn to N36.88tr, from the previous day’s N36.871tr, which also represented a 0.05% value gain.
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Meanwhile, Thursday’s session upturn was driven by buying interest in UBA, Zenith Bank, FBNH, Accesscorp, Unilever, and Nascon, among others. This impacted mildly on Year-To-Date gain which inched up to 30.99%, while Market Capitalization YTD gain stood at N8.14tr, representing a 33.88% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Insurance closed lower by 1.80%, while NGX Banking led the advancers after gaining 0.94%, followed by, Consumer goods with 0.07%. Just as NGX Oil/Gas and Industrial goods finished flat.
Market breadth was positive as gainers outnumbered losers in the ratio of 22:9, while transaction in volume and value terms were mixed, after market players exchanged 309.32m shares worth N4.55bn, driven by trades in Fidelity Bank, Accesscorp, UBA, Zenith Bank and Transcorp.
Thomas Watt and Courtvile Business Solution were the best performing stocks, gaining 9.79% and 8.77% respectively, closing at N2.58 and N0.62 per share respectively, on market forces and sentiment. On the flip side, Cornerstone Insurance and Mansard lost 6.06% and 3.61%, closing at N1.55 and N4.00per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect mixed sentiments to continue on TB yields drop, CBN embargo lifting, bargain hunting and portfolio repositioning ahead of September CPI and Q3 corporate earnings reports in the face of sector rotation, with all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.
However, pullbacks are creating ‘buy’ 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