Expect Improved Sentiment On Bargain Hunting, Realignments Ahead Of Q3 Reports

Market Update for October 3

Trading on the Nigerian Exchange for the all-important last quarter of 2023 started positively Tuesday, after the nation’s Independence Day holiday on Monday, ahead of the seasonality associated with the period which would shape market sentiment and momentum. Already, the month of September witnessed increased volatility and selloffs to create entry opportunities for discerning investors and smart traders in the new month, with all eyes on the Q3 earnings reporting season and the reconvening of Monetary Policy Committee meeting by the central Bank of Nigeria leadership settles down.
The buying interest witnessed among blue-chip companies impacted positively on the benchmark NGX All-Share index which closed higher, thereby halting the seventh successive session bear run after seven consecutive session on an above average traded volume. Market breadth was however negative, while more companies announced their closed period on the exchange for the Q3 financials expected to start hitting the market any moment from next week for early filers. The index action rebounded after forming a bullish hammer and double bottom within the consolidation range. However, the need to confirm continuation is necessary as the market opens today.
Amidst concerns over macroeconomic headwinds in the country today, Q3 earnings reports are expected to remain mixed, due to the ongoing fiscal reforms by government, as well as foreign exchange market challenges that have persisted with the Naira already crossing the N1,000/US Dollar threshold. 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 the final quarter of this year. Despite the mixed sentiment witnessed so far, the market’s big uptrend remains intact to trade above the 50-Day moving average, despite testing it in the midst of material shift of the index and the ongoing volatility.
Tuesday’s rebound signaled the activities of bargain hunters in the market, but investors should trade consumer and industrial goods with caution while repositioning their portfolios, the targeting services industry stocks 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 mixed outlook for fixed income instruments yields and rates in the face of rising inflation, high interest rate and exchange rate challenges due to the high volatility in the exchange. However, candlestick formation at the end of the session signals a bearish pattern that supports downtrend, just as the 2008 resistance level turned another strong support level to watch.
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Oil price oscillation continued, as it slides to trade at $90.86 per barrel ahead of OPEC meeting in the midst of recession fear, stronger US dollar and more hawkish central banks moves, in the face of high treasury yields and inflation waves that may affect crude demand. 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 opened in the green which was sustained, despite oscillating throughout the session on buying interests in industrial goods, banking stocks and profit taking among others, a situation that pushed the Index to an intraday high of 66,954.13bps from its lows of 66,123.48bps, before closing above its opening figure at 66,770.97bps.
Trading metrics were negative and mixed with a higher volume traded when compared to the previous session in the midst of breadth favoring the bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 80% buy position and 20% sell volume. The total transaction volume index stood at 0.61 points, just as the energy behind the day’s performance was weak, with Money Flow Index reading 43.13pts, from the previous day’s 38.22pts, indicating that funds entered the market.
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Index and Market Caps

The key performance NGXASI, at the end of Tuesday trading gained 388.83bps, closing at 66,770.97bps, from its 66,382.14bps opening level, representing a 0.59% growth. Market capitalization also rose by N212.8bn to N36.54tr, from the previous day’s N36.33tr, which also represented a 0.59% value gain.
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The upturn was driven by position taking in BUA Cement which Sunday announced a reduction in the price of a bag of cement to the relief of Nigerians, Oando, GTCO, Accesscorp, Zenith Bank, Beta Glass, UACN and UPDC, among others. This impacted positively on Year-To-Date gain which rose to 30.28%, while Market Capitalization YTD gain stood at N7.84tr, representing a 31.94% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Industrial goods and Banking closed higher by 3.53% and 0.31% respectively, while NGX Insurance led the decliners after losing 1.81%, followed by, Consumer goods with 0.41%. Just as NGX Energy finished flat.
Market breadth was negative as losers outpaced gainers in the ratio of 26:24, while activities in volume and value were up after investors exchanged 364.3m shares worth N3.96bn, driven by trades in CHI Plc, Fidelity Bank, Oando, GTCO and Accesscorp.
BUA Cement and Beta Glass were the best performing stocks, gaining 9.9% and 9.89%, closing at N94.00 and N66.95 per share respectively, on market forces and sentiments. On the flip side, Linkage Assurance and CWG lost 10% and 9.94% respectively, closing at N0.72 and N7.79per share, purely on the back of profit booking.

Market Outlook
We expect improved sentiment and momentum on bargain hunting and portfolio repositioning ahead of Q3 corporate earnings reports in the face of sector rotation. As all eyes are on the reconvening of monetary policy meeting by CBN.
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