Market Update for September 12
Cautious trading continued on the Nigerian Exchange, following which the week started on a negative sentiment, halting two consecutive sessions of positive outings, as the key performance NGX All-Share Index closed lower on a low volume and flat market breadth.
Also, selling pressure was witnessed across the major sectors that pulled back, especially in financial services, industrial goods, among others, propelled by profit taking in the midst of interim dividends payment and corporate actions, just as all eyes are on Accesscorp half-year earnings report.
Analysts are also expecting the August consumer price index, a major economic report that will shape and influence investors’ sentiments ahead of the Central Bank of Nigeria (CBN) Monetary Policy Meeting (MPC) on rate hike or otherwise.
The continued low liquidity in the equity space is due to the absence of smart money, representing the activities of institutional investors is betrayed by the volume of trades in recent months and days as the increase in rates continue to impact favourably on fixed income yields. But in hedging against inflation that is reading 19.64%, some sectors and individual equities remain the best bet for capital preservation and growth in this changing environment.
The oscillating trend in the market is attributed to the historical case for the September effect, depending on the period analysis and what is happening. It is generally believed that retail investors liquidate their portfolios, going into the month, to pay school fees for their children and wards, among other seasonal expectations highlighted earlier. Others include the fear of a global economic recession and Nigeria’s pre-election year tension, ahead of Q3 earnings reporting season in October.
Also, the market continues its sideways movement, while awaiting a trigger and at the same time creating ‘buy’ opportunities for discerning investors as revealed by the price action, volume and momentum.
The volume pattern and index structure in recent days show position taking while funds enter some stocks as revealed by the volume traded and money flow index which need to be confirmed, especially as the sell pressure recorded on Monday signals a change in trend, ahead of the above mentioned events in the month.
My answer regarding what to do under the current phase or market mood, whether regarding an individual stocks or an index, especially when to buy or sell, is always based on price actions and the money flow direction. We only want to hold stocks that are increasing, or at least retaining their value, while avoiding equities that are on the decline, and the toolset to evaluate price action is technical analysis.
The contemporary technical analysis that works in the changing volatile market, is what you should adopt. That is why it’s never been more important to join me at the upcoming Q4 Master Class in October, the largest quarterly traders summit in Nigeria. I will be sharing new actionable strategies and real trading education that will arm you with the tools that will help you meet your financial goals for the rest of the year 2022 and beyond.
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Oil prices rebounded, trading above $95 as the nuclear deal with Iran seemed to fade further away and markets reinforced on Europe’s coming ban on Russian oil and tight supply fears. The continued oscillation in 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.
Meanwhile, Monday’s trading started slightly in the green and oscillated, pulling back between the midday to afternoon on profit taking in blue-chips stocks, a situation that pushed the NGX’s index to an intraday low of 49,626.05bps from its highs of 49,703.85ps, before closing below its opening figure at 49,626.05bps.
Market technicals were weak and mixed, with lower volume of shares traded than the previous day in the midst of flat breadth on a selling sentiment as revealed by Investdata’s Sentiments Report showing 100% sell position. The total transaction volume index stood at 0.47points, just as energy behind the day’s performance was relatively strong as Money Flow Index is looking up at 63.13pts, from the previous day’s 60.89pts, indicating that funds entered the market, despite closing down.
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Index and Market Caps
The benchmark NGXASI, at the close of Monday’s trading sled 69.07bps, closing at 49,626.05bps, after opening at 49,695.12bps, representing a 0.14% drop, just as market capitalization lost N37.25bn, closing at N26.77tr, from the previous day’s N26.80tr, which also represented a 0.14% value loss.
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Monday’s downturn was driven by selloffs in Beta Glass, NEM, FCMB, NGXGroup, FBNH, UBA, Fidelity Bank, Lafarge Africa, Livestock Feeds, and NPF Microfinance, among others, which impacted mildly on Year-To-Date gain, which dropped to 16.18%. Market capitalization gain YTD also rose to N3.23tr YTD, representing a 20.05% rise over the opening level for the year.
Bearish Sector Indices
The sectorial indexes were in red, except for the NGX Consumer Goods that closed 0.02% higher, while the NGX Insurance index led the decliners after shedding 1.41%, followed by Banking and Industrial goods with 0.45% and 0.29% respectively. Just as Energy closed flat.
Market breadth was at par, as the number of gainers equalled losers in the ratio of 13:13; just as activities in volume and value were down, after stockbrokers transacted just 86.59m shares worth N1.17bn, with volume driven by trades in GTCO, Sterling Bank, Zenith Bank, Fidelity Bank and Chams.
Multiverse and FTNCocoa were the best-performing stocks, gaining 9.32% and 6.67% respectively, closing at N2.58 and N0.32per share respectively on market forces. On the flip side, Betaglas and NEM Insurance lost 9.96% and 7.96% respectively, closing at N46.10 and N5.20 per share, purely on profit taking.
We expect cautious trading ahead of consumer price index report, as all eyes are on Accesscorp’s result and next MPC meeting, while portfolio rebalancing continues on bargain hunting. Also, investors continue to analyse the numbers released by UBA, 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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