Market Update for September 27
Tuesday’s was yet another mixed session on the Nigerian Exchange as the benchmark NGX All-Share index short-lived the previous day’s positive outing on panic selling and profit taking as the feelers of another rate hike filtered into the market towards the close of trading late afternoon. Before then, trading had remain quiet and cautious from the opening bell, with all eyes on the outcome of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting, amidst the low valuation and portfolio rebalancing ahead of quarter-end.
The announcement of the rate hike trigger another sell pressure as blue-chips suffered losses, halting the positive sentiment that opened the week on a very high traded volume and negative market breadth. As the CBN increased the benchmark interest rate by 150 basis points to 15.5% and Cash reserve ratio by 500 points to 32.50% while maintaining all other parameters at their current levels, all in a bid to tame the spiraling inflation at its 17-year high of 20.52% at the end of August, and attract foreign exchange inflow, at the expense of the economy growth in the midst of negative macroeconomic indices already pointing to a contraction.
Consequently, within a space of six month, the CBN has increased its MPR by a total of 400 basis points in the bid to also manage pressure on the Naira owing to the problem in the foreign exchange market.
As such, attention has shifted to the primary Treasury Bills market auction in the aftermath of the 150 basis points rate hike, in the midst of low liquidity, negative macroeconomic data and preparation of 2023 general election.
Banking stocks sustained positive sentiments at the end of Tuesday, despite the selling sentiment of the general market on strong volatility, just as the aggressive hawkish monetary policy across the globe continues despite warnings by the World Bank and IMF that central banks should rethink rate hiking which could push the global economy into recession if not checked.
The last quarter of 2022 is finally here, but we need to finish the year strong, so join us this Saturday at Investdata Master Class, this is where we take a step back, analyze the general direction of the major trends, and then break it down into shorter timeframes for more tactical opportunities. The low valuation of NGX, high earnings and dividend yields on improved earnings released so far in the year, coupled with the expectation of third quarter corporate earnings to shape the market direction in the face of inflation hitting 17 years high above 20%, causing many players 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 rate 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. Those are stocks players should be paying attention to, as the correction in the NGX index action create buying opportunity 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 weaken 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.
At the current phase of the market, the decision of when to buy or sell individual stocks or an index, 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.
This is not the time to use classical technical analysis that does not works in the changing volatile market like ours today. 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. Also, the last quarter of the year is around the corner, are you prepare to take advantage of seasonality to recover your losses and boost your gains?
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 price continued its oscillation as it pulled back slightly to trade at $84.43 on the bad news of predicted aggressive action from the Fed, supply tighten due to Russia Ukraine war in the midst of weak demand and fear of recession around the globe on 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.
Meanwhile, Tuesday’s trading started slightly in the upside and was sustained till midday, before oscillating on selloffs in blue chip stocks and large cap companies shares, a situation that pushed the NGX’s index to an intraday low of 49,154.50bps from its highs of 49,223.31 bps before closing marginally below its opening figure at 49,161.45bps.
Market technicals were negative and mixed, with higher volume of shares traded than the previous day in the midst of breadth favoring bears on selling sentiment as revealed by Investdata’s Sentiments Report showing 10% buy position and 90% sell volume. The total transaction volume index stood at 1.22points, just as energy behind the day’s performance was weak as Money Flow Index is looking up at 31.032pts, from the previous day’s 21.96pts, indicating that funds entered the market, despite closing lower for the session.
For you to successfully invest and trade in this volatile market, order for Investdata’s video on Buy & Sell Technical Analysis Toolbox to navigate the volatile market profitably, enhance trading decisions and boost your bottom line. Also, to up your game in stock trading and investing, understanding the key to trading price and index action will go a long way to make the difference in your trading results, check out the video materials below.
Index and Market Caps
At the end of Tuesday’s trading. The key performance NGX All-Share Index lost 27.17bps, closing at 49,161.455bps, after opening at 49,218.352bps, representing a 0.10% drop, just as market capitalization fell by N31bn, closing at N26.52tr, from the previous day’s N26.57tr, which also represented a 0.10% value loss.
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Tuesday’s downturn was driven by selloffs in Vitafoam, Accesscorop, Unilever, FBNH, GTCO, GSK, UBA, Sterling Bank and Academy Press among others, which impacted positively on Year-To-Date gain, as it increases to 15.09%. Market capitalization gain YTD also rose to N2.92tr YTD, representing a 20.06% rise over the opening level for the year.
Mixed Sector Indices
Sectorial performance indexes were mixed, as NGX Banking, Consumer and Industrial Goods closed higher by 0.65%, 0.06% and 0.01% respectively, while the NGX Energy index led the decliners after losing 0.20%, followed Insurance with 0.06%.
Market breadth was negative, as losers outpaced gainers in the ratio of 17:14; just as Activities in volume and value were up, with stockbrokers traded 206.08m shares worth N1.78bn, with volume driven by trades in Transcorp, Zenith Bank, FCMB, Vitafoam and Linkage Assurance.
Multiverse and NGX Group were the best-performing stocks, gaining 10% each, closing at N3.41 and N19.30per share respectively on market forces and earnings expectation. On the flip side, May Baker and Regency Insurance lost 9.80% and 7.70% respectively, closing at N3.50 and N0.24 per share, purely on selloffs.
We expect a mixed sentiment as players reacts to 150 basis points rate hike and bargain hunting taking advantage of price correction in the midst of quarter-end window dressing by fund managers. This is just as banking stocks are gaining attention due to their undervalue state and the expected impact of rate hike on the sector, 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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