Expect Mixed Sentiments Amid Bargain Hunting On Low Prices, Repositioning Ahead Q3 Earnings

The seeming rebound on the Nigerian Exchange continued on Tuesday as the benchmark NGX All-Share index closed higher on improved buying sentiments across some major sectors as market players adjust to the new prevailing interest rate to reposition their investment portfolio ahead of macroeconomic data for September consumer price index and Q3 corporate earnings reports.

Bargain hunting among the blue-chip stocks that recently suffered losses had been the target ahead of companies’ quarterly earnings report that will start hitting the market any moment from next week, especially the early filers like Infinity Trust Mortgage, Ucap, Africa Prudential and others.

The prevailing value in banking stocks and other large cap companies supported the buying interest that stopped the market from breaking down its critical support levels or psychological line of 47,000 ahead of earnings reporting season on a low traded volume and slightly negative market breadth in the midst of low liquidity and economic headwind. This, thereby, extended its bull-run for two consecutive sessions in the face of positive sentiments and slow momentum.

With all eyes on the major macroeconomic data, Q3 earnings reporting season and last quarter seasonality expected to change the prevailing trend, or direction, even as the 2023 electioneering activities are on the rise with the kickoff of party campaigns expected to be issue-based, considering the state of the nation’s economy and insecurity. Also, more listed companies have continued to notify the exchange of their closed period and board meetings dates to consider and approve the financials for the quarter-ended September 30, 2022.

The power of perception or sentiments cannot be overemphasized in stock trading or investing, seeing the impact of aggressive hawkish monetary policy across the globe, with all eyes on the US September Consumer price index report today. The UK experience, coming after the World Bank and IMF’s continued warning that the central banks should rethink and avoid pushing the global economy into yet another recession. We see that is already happening in UK, China, Japan and others. It is time for the Nigerian central bank and its Monetary Policy Committee to have a rethink before things go further out of hand.

The low valuation of the NGX, high earnings and dividend yields on improved earnings released so far in the year, coupled with the expectation of the third quarter corporate earnings to shape the market’s direction in the face of inflation hitting a 17-year high at above 20%. This has caused many players to stay on the fence, waiting to confirm direction before jumping in, as outlook for the economy and the financial market remains unpredictable.

Despite the lingering high interest rates atmosphere, rising inflation and slowing industrial output as a result of policy changes and uncertainty around the globe, there are sectors, industries and individual stocks that are still seeing positive activities from traders and investors. There are equity players should pay attention to, as the correction in the NGX index action create buying opportunities in some sectors and individual defensive stocks with high dividend high yield and positive earnings growth.

Market internals are revealing the hidden forces that work for both short and long-term traders to get into the best position and allow you to stay in them for maximum profit, despite the market rebounding, or weakening further. The market’s internals that 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 movements. So, the volume pattern and index structure in recent sessions show position taking, while funds enter some stocks as revealed by money flow index which need to be confirmed, especially as negative sentiment supported the previous session candlestick formation.

To navigate the rest of the month profitably using fundamental and technical analysis to run, join investdata 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 range market. Despite the mixed sentiment witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”

Oil prices sustained its oscillation to trade at $94.30 on fear of recession hitting demand, despite the recent OPEC production cut and supply tighten due to Russia Ukraine war that are getting worst. Coupled with the impact of hawkish monetary policy by central banks, just as China COVID-19 lockdown come to an end. The up and down movement of 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 green and it was sustained for the rest of the day, as demand for stocks and profit-taking hit the highly priced stocks and others, a situation that pushed the NGX’s index to an intraday high of 47,664.66bps from its lows of 47,195.25bps before closing above its opening level at 47,565.92bps.

Market technicals were weak and mixed, with a slightly lower volume of trade than the previous session in the midst of breadth favoring the bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 79% buy position and 21% sell volume. The total transaction volume index stood at 0.73points, just as impetus behind the day’s performance was weak as Money Flow Index is looking up at 24.94pts, from the previous day’s 19.94pts, indicating that funds entered the market.

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Index and Market Caps

The NGX All-Share Index on Tuesday gained 214.94bps, closing at 47,565.92bps, after opening at 47,351.45bps, representing a 0.5% growth, just as market capitalization rose by N116.8bn closing at N25.91tr, from the previous day’s N25.79tr, which also represented a 0.5% appreciation in value.

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Meanwhile, the upturn was driven by accumulation in BUA Cement, Accesscorp, UBA, Jaiz Bank, Ucap, Africa Prudential, May/Baker, NGXGroup and Ikeja Hotel, among others which impacted positively on Year-To-Date gain, rising it to 11.35%. Market capitalization gain YTD increase to N2.07tr, representing a 18.15% rise over the opening level for the year.

Mixed Sector Indices

Sectorial performance indexes were mixed, as NGX Energy and Consumer goods closed lower by 2.14% and 0.10% respectively, while NGX Industrial goods led advancers after gaining   3.18%, followed by Banking and Insurance with 0.65% and 0.24% respectively.

Market breadth remained negative, as losers outpaced gainers in the ratio of 14:13; just as transactions in volume and value were mixed, as players traded 125.64m shares worth N1.90bn. Volume was driven by trades in GTCO, FBNH, NGX Gruop, Transcorp and Chams.

May/Baker and Ikeja Hotel were the best-performing stocks, gaining 9.76% and 9.73% respectively, closing at N4.05 and N1.24 per share respectively on market sentiment and forces. On the flip side, University Press and Cadbury lost 8.54% and 6.34%, closing at N1.50 and N11.40 per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments as bargain hunters taking advantage of the low prices to reposition ahead Q3 corporate earnings. This is just as banking stocks are gaining attention, despite profit taking that makes the sector more attractive for income investors, while portfolio rebalancing continues on bargain hunting 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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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605