Market Update for October 13

The bearish mood on the Nigerian Exchange was extended on Thursday in a mixed sentiment and low traded volume that signal a test of supply in a seemingly renewed buying interest as revealed by the session’s sentiment report. The benchmark NGX All-Share index closed slightly lower on a ranging move, as position taking in the major sectors of the market pushed the indexes northward on a positive market breadth with all eyes on inflation data for September and corporate earnings reports with mixed vibes around the market already.

Understanding the big picture and the outlook of the expected financial reports of the companies in this changing business and economic environment across the globe and locally, will help market players to reposition their portfolio on the strength of the 11 sectors of the market performance and sentiment rank from strongest to weakest right now.  Meanwhile, bargain hunters are capitalizing on the persisting low valuation and divergence from real value in expectation of closing gap in the future dates for profit and gains.

The release dates for the macroeconomic data and Q3 companies’ earnings reports is drawing closer, especially from the early filers like Infinity Trust Mortgage, UCap, Africa Prudential and others, just as United Capital board of directors are meeting today to approve the third quarter financial statement for the period ended September 30, 2022.

The prevailing low transactions in the market reflects the low liquidity and impact of high yield in the fixed income market, in the last TB primary auction 364 days rate hit 13%, but with the expected liquidity level to improve as 2023 electioneering activities move into top gear with the kickoff of party campaigns, considering the state of the nation’s economy and lingering insecurity. Also, more board meetings dates to consider and approve the financials for the quarter-ended September 30, 2022 have been fixed for the coming days and weeks.

As educated traders or investors, you know 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 investors reacting to US September Consumer price index report released yesterday. 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.

Value investing is continuing on the exchange, with 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 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.

If you are in the market to make money, trading and investing is a serious business and should be as such, how you run your business is naturally up to you, blaming others for your decision is a waste of time and burns bridges faster than a lit match in a dry pile of hay.  It is never too late to start fresh. Whether starting a new profession or abandoning old trading and investing habits and positions in favour of new ones. It is never too late to turn a new leaf.  Always trade what you are seeing by looking at price action, momentum, market timing and forecast to boost your trading results in any market situation.  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 mixed 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 $95.05, in the midst inflation data and recession fears, 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.

Thursday’s trading opened slightly on the upside and slide down in the midday to oscillate for the rest of the session on profit-taking and buying interest in banking stocks and others. This pushed the NGX’s index to an intraday low of 47,486.80bps from its highs of 47,550.47bps before closing marginally below its opening level at 47,524.38bps.

Market technicals were weak and mixed, with lower volume of trade than the previous session in the midst of breadth favoring the bulls on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 59% buy position and 41% sell volume. The total transaction volume index stood at 0.52points, just as energy behind the day’s performance was weak as Money Flow Index is looking flat at 31.32pts, from the previous day’s 31.77pts, indicating that funds in the market was stable at same level.

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Index and Market Caps

The NGX All-Share Index at the end of Thursday’s trading fell by 7.46bps, closing at 47,524.38bps, after opening at 47,531.94bps, representing a 0.02% drop, just as market capitalization fell by N4.06bn closing at N25.89tr, from the previous day’s N25.89tr, which also represented a 0.02% value loss.

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Meanwhile, the downturn was driven by selloffs and profit taking in Geregu, UACN, Champion Breweries, International Breweries, Oando, Sterling Bank, FCMB and  Lasaco Assurance, among others which impacted mildly on Year-To-Date gain, reducing it to 11.26%. Market capitalization gain YTD increase to N2.04tr, representing a 18.08% rise over the opening level for the year.

 Mixed Sector Indices

Sectorial performance indexes were mixed, as NGX Banking and Insurance closed 0.93% and 0.22% higher respectively, while NGX Consumer goods and Energy were down by 0.07% each.  Just as NGX Industrial goods closed flat.

Market breadth turn positive, as advancers outpaced decliners in the ratio of 13:10; just as transactions in volume and value were down, as stockbrokers traded 84.85m shares worth N2.07 bn. Volume was driven by trades in GTCO, Zenith Bank, Accesscorp, UBA and FBNH.

Honeywell Flour and Neimeth Pharm were the best-performing stocks, gaining 9.79% and 9.52% respectively, closing at N2.13 and N1.38per share respectively on market sentiment and forces. On the flip side, UACN and Geregu Power lost 9.76% and 9.02%, closing at N9.25 and N110 per share, purely on selloffs and profit taking.

Market Outlook

Being the last trading day of the week, we expect mixed sentiments to continue as all eyes are on the September Consumer price index, as bargain hunters taking advantage of the low prices to reposition ahead the 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

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605