Cautious Trading Persists As Investors Await Economic Data To Trigger Next Move
Market Update for September 13
The seesaw movement witnessed in recent times continued on the Nigerian Exchange Tuesday, with the benchmark NGX All-Share index closing marginally up. Helped by the seeming buying interest in a few blue chip stocks, which halted the previous session loss position, even as low transaction volume persisted as market breadth flipped negative. Caution reigned on the bourse as all eyes remained on the August inflation data and the expected half-year earnings report from Accesscorp.
The mixed sentiment across the major sectors resulted from portfolio rebalancing and sector rotation that is ongoing in the market, as investor position in stocks with higher earnings and dividend yields to hedge against inflation in the face of low liquidity in the market due to rate hike and absent of institutional investors. Also, position taking in some banking and industrial goods stocks helped the index to close slightly up.
The expected August consumer price index 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 increase in 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.
As the market continues its sideways movement, the internals are revealing the hidden forces that works for both short and long term traders to get into the best position and allow you to stay in them for maximum profit. The market internals measure the forces behind the advancers and associated volume of the uptick or downtick. These two ratios tell you everything you need to know to predict future price movement. So, 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 mixed sentiment recorded on Tuesday 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 which combines price and volume. 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 pulled back to trade at $93.07 as UA inflation data beat projection to increase fear of recession as CPI report support rate hike from Fed next meeting in the face of China battling with Covid 19 lockdown. 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.
Tuesday’s trading opened slightly in the upside and oscillated at midday to afternoon on profit taking and buying interest in blue-chips stocks, a situation that pushed the NGX’s index to an intraday high of 49,655.34bps from its lows of 49,612.40ps, before closing slightly above its opening figure at 49,627.72bps.
Market technicals were weak and mixed, with higher volume of shares traded than the previous day in the midst of breadth favoring bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 64% sell position and 34% buy volume. The total transaction volume index stood at 0.80points, just as energy behind the day’s performance was relatively strong as Money Flow Index is looking up at 63.51pts, from the previous day’s 63.13pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Tuesday’s trading, the NGX All Share index inched up 2.01bps, closing at 49,627.72bps, after opening at 49,626.05bps, representing a 0.004% up, just as market capitalization rose by just N90 million, closing at N26.77tr, from the previous day’s N26.77tr, which also represented a 0.004% value gain, just a flat position.
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Meanwhile, Tuesday’s upturn was driven by demand for shares in Cutix, NGXGroup, UPDC, Fidelity Bank, Lafarge Africa, Accesscorp, Learn Africa, Honeywell, and Nahco, among others, which impacted mildly on Year-To-Date gain, which remained flat at 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 Industrial Goods that closed 0.14% higher, while the NGX Insurance index led the decliners after shedding 0.57%, followed by Banking and Consumer goods with 0.09% and 0.02% respectively. Just as Energy closed flat.
Market breadth turned negative, as losers outnumbered gainers in the ratio of 16:13; just as transactions in volume and value were up, after investors exchanged 160.24m shares worth N1.49bn, with volume driven by trades in Zenith Bank, Courtville Business Solution, Transcorp, Chams and GTCO.
Multiverse and NPF Microfinance were the best-performing stocks, gaining 9.69% and 7.84% respectively, closing at N2.83 and N1.65per share respectively on market forces. On the flip side, Redstar Express and Caverton lost 10% and 4.55% respectively, closing at N2.43 and N1.05 per share, purely on selloffs and 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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