Expect Mixed Trend As TB Auction Opens, Investors Reposition For Q3 Earnings

Market Update for October 12

Equity prices and major sectorial indexes on the Nigerian Exchange closed higher on Tuesday, turning the composite NGX All-Share index green on a very high traded volume and positive breadth ahead of key economic data and Q3 earnings reporting season that kicks off any moment from now, reversing the previous session’s negative outing. 

Tuesday’s positive statistics and bullish momentum were driven by market players repositioning in the financial and industrial stocks after the previous day’s pullback created a good entry point for discerning investors and traders. This is coming at a time the market looks forward to the consumer price index for September that will be released on Friday, October 15, 2021, according to the calendar of the National Bureau of Statistics.

Technically, the market had a positive sentiment to breakout the minor resistance of 40,884.19bps at the end of Tuesday’s trading, after testing an intraday high of 40,914.83 on a very high traded volume driven by FBN Holdings. This resistance level of 41,014.22bps confirmed a strong reversal move that awaits the NGX index action to breakout, which is possible this week, considering the fact that buyers are taking over the market ahead of the Q3 numbers. However, the state of expected earnings reports and level of liquidity in the equity space will determine the rate and height of the rally in October. All eyes are on the Treasury Bills Primary Market Auction rates today, even as transactions in the two and three-year savings bond with rates of 6.9% and 7.9% respectively are being concluded. Nonetheless, the Money flow index slipped down slightly to 84.98points, to reflect the profit booking activities of investors.

Investors should hold onto their high value and growth stock positions, even as the direction in the fixed income market, by way of yields and rates, is still unclear, though not unexpected, since funds flow to where there are higher returns.

Meanwhile, Tuesday’s trading started on the upside and oscillated throughout the session buying interest in banking stocks and others that pushed the benchmark index to an intraday high of 40,914.83 basis points, from its lows of 40,714.00bps, after which it closed above the opening points at 40,896.96bps.

Market technicals were positive and strong as volume traded was higher than the previous day’s in the midst of breadth favouring the bulls and buying pressure as revealed by Investdata’s Sentiment Report showing 01% ‘buy’ position and 9% sell volume. The total transaction volume index stood at 1.99 points, just as the momentum behind the day’s performance was strong.

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Index and Market Caps

At the close of Tuesday trading, the key performance index NGXASI gained 182.96 basis points and closed at 40,896.96bps after opening at 40,714.22bps, representing a 0.45% growth, just as market capitalization rose by N95.46bn, closing at N21.31tr, from the opening value of N21.22tr, also representing 0.45% appreciation in value.

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The session’s upturn was driven by demand in stocks like BUA Cement, FBNH, Access Bank, GTCO, ETI,  Stanbic IBTC, and UBA, among others, which impacted positively on Year-To-Date gain, raising it to 1.56%. Market capitalization was up by N254.06bn YTD, representing a 1.21% growth from the year’s opening value.

Bullish Sector Indices

Performance indexes across sectors were green, except for the NGX Oil/Gas that closed lower by 0.71%, while the NGX Insurance led the advancers after gaining 1.02%, followed by Banking, Industrial and Consumer goods with 1.00%, 0.51%, and 0.06% respectively

Market breadth was positive, as gainers outnumbered losers in the ratio of 27:13, while activities in volume and value terms were up, after investors traded 563.88m shares worth N5.10bn, compared to the previous day’s 191.31m units valued at N2.59bn. Volume was driven by trades in FBNH, Champion Breweries, Ecobank Transnational Incorporated, UBA, and Fidelity Bank.

Champion Breweries and Cornerstone Insurance were the best performing, gaining 10% and 9.80% to close at N2.53 and N0.56per share respectively on acquisition news and market forces ahead of Q3 numbers. On the flip side, Consolidated Hallmark Insurance and Japaul Gold lost 6.98% and 6.23% respectively, closing at N0.55 and N0.45per share purely on profit taking and market forces.

Market Outlook

We expect a mixed trend as TB auction opens today investors reposition for Q3 earnings season and year end. Just as candlestick formation at the Monday trading revealed change of trend on a low volume. It is equally noteworthy that this pullback is for accumulate more positions ahead of the earnings reporting season. Also many stocks are trading within their buy ranges, a situation expected to attract more funds into the equity space, given the Dividend Yield capable of serving as a hedge against inflation.

Also, institutional investors and others continue to digest recently release economic data, outcome of Treasury bill auction were 91 and 182 days tenor rate remain unchanged and 364 days slightly up by 30points to 7.50% for a whole one year ahead of last quarter and year end repositioning of portfolios. Also, investors are still observing the interplay of forces in the FX market as the CBN postpone the launch of the new digital currency platform. The day’s low volume suggests that institutional investors and others are not making move yet in the market, as they look at the economic data and policy direction of the economic managers. It is noteworthy that oil price rebounded in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.

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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605

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