Expect Mixed Sentiments On Profit Taking, Portfolio Rebalancing, Corporate Earnings

Market Update for November 13

Profit booking resurfaced on the Nigerian Exchange on Monday, starting the week on a negative note, thereby halting six straight days of gains, as portfolio rebalancing continued in the midst of higher yields in the fixed income market. This is happening despite impressive corporate earnings that are likely to support higher dividend payout at the end of the current financial year.
That nonetheless, selling sentiment and pullbacks was noticeable at Monday’s trading, with market breadth closing positive in the mixed session, while investors and traders continued hedging against the spiraling inflation that has supported some company performances, as reflected on their latest scorecards. This is also likely to support their payout in form of dividend upon which share prices feed.
This mixed bag of rising fixed income market yields will continue to influence portfolio management, rebalancing and readjustment ahead of macroeconomic reports, like the October consumer price index, Q3 GDP, the Monetary Policy Committee meeting, and year end seasonality.
The NGX All-Share index closed lower on an above-average traded volume and positive market breadth in the face of latest bond auction yields that was heightened. Other factors include the slow economic growth and rising rate of insecurity across the country, following which many countries have issued travel advisory to their citizens. This, we must note, and sadly too, is not good for the economy, because no foreign investor will come into an unsafe country, except for the high risk takers.
The candlestick formation signaled correction is underway, even when the NGX index is making higher highs to test a new all-time high of 71,136.14 points, to enter distribution phase. So, continuation or reversal needs to be confirmed as the top chart pattern of the index supports a reversal. Traders needs to watch out for this, even as the NGX index action is trading above the T-Line on a very high volatility.
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Oil price oscillation continued, as it inched up to trade at $82.75 per barrel in the midst of global demand concerns and shift in sentiment on declining speculative buying. It is set to rebound in the face of the ongoing Middle East conflict, despite the rate pause by central banks and cooling inflation. With geopolitical tensions rising across the globe at a time the Russia-Ukraine war gradually approaches its third year, and remains a major concern with much more at stake than previously thought. The supply tightening due to the Russia-Ukraine war will propel the up and down movement in oil price, which also drive market volatility across the globe.
Meanwhile, Monday’s trading opened slightly in the green but oscillated to pullback by afternoon on profit taking in highly priced and others, a situation that pushed the Index to an intraday low of 70,621.88bps from its highs of 71,136.14ps, before closing below its opening figure at 70,644.85bps.
Market technicals were positive and mixed with a lower volume traded, when compared to the previous session, in the midst of breadth favoring the bulls on a selling sentiments as revealed by Investdata’s Sentiments Report showing 4% buy position and 96% sell volume. The total transaction volume index stood at 1.23 points, just as the impetus behind the day’s performance was strong, with Money Flow Index reading 81.61pts, from the previous day’s 88.99pts, indicating that funds left the market.
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Index and Market Caps
At the end of Monday, the benchmark NGX All-Share Index shed 204.53bps, closing at 70,612.81bps, from the 70,849.38bps opening level, representing a 0.33% decline. Market capitalization fell by N132.61bn, closing at N38.80tr, from the previous day’s N38.93tr, which also represented a 0.33% depreciation in value.
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Monday’s downturn was driven by selloffs in BUA Cement, Seplat, Accesscorp, NEM, International Breweries and UPDC, among others, impacting negatively on Year-To-Date gain which reduced to 37.78%, while Market Capitalization YTD gain stood at N10.55tr, representing a 39.34% rise above its opening level for the year.

Bearish Sector Indices
Sectoral performance indexes were, nonetheless down, save for the NGX Banking index that closed 0.38% higher, while NGX Industrial goods led the decliners after losing 3.27%, followed by Insurance and Consumer goods with 0.09% and 0.02% respectively. Just as NGX Energy finished flat.
Market breadth was positive as gainers outnumbered losers in the ratio of 24:18, while activities in volume and value terms were mixed, after investors exchanged 474.39m shares worth N7.75bn, driven by trades in Fidelity Bank, Japaul Gold, UBA, Transcorp and Jaiz Bank.
RT Briscoe and Alex were the best performing stocks, gaining 10% each, closing at N0.66 and N7.15per share respectively, on market sentiment and forces. On the flip side, Japaul Gold and BUA Cement lost 9.09% and 7.76%, closing at N1.80 and N98.70per share, purely on the back of profit taking.

Market Outlook
We expect mixed sentiments on profit taking and portfolio rebalancing on the strength of the better-than-expected corporate numbers released and expected inflation reports in the face of high yields and sector rotation.
Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.

Take Action

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CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605