Expect Mixed Trend As Traders Book Profit, Reposition For Q3 Earnings

Market Update for October 14

Thursday’s trading activities on the Nigerian Exchange were mixed and volatile, as it maintained a positive outing for the third consecutive day on a reduced bullish momentum, despite the strong buy-side on a heavy volume traded and positive market breadth.

The continued high volume traded and money flow index read 94.42 points indicating the presence of smart money playing banking stocks like FBN Holdings which has remained the top trades for the past two weeks to trigger buying interests in financial stocks regardless of the seeming profit taking witnessed in the banking and insurance sectors in the trading session. 

Technically, the NGX index and other stocks like Chams, GSK, Sterling Bank and Africa Prudential Insurance broke out their minor resistance levels at the end of the trading session, just as the benchmark index action broke out its minor resistance level of 41,087.40bps after touching 41,144.9bps on positive sentiments 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 rally this October and indeed the Q4 will go.

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

Meanwhile, Thursday’s trading started on the upside on demand for shares of FBNH and Champion Breweries, which was sustained throughoutthe session, on position taking and profit booking that pushed the NGX index to an intraday high of 41,144.99 basis points, from its lows of 41,041.35bps. Afterwards, the index closed above the opening points at 41,129.98bps.

Market technicals were positive and strong as volume traded was higher than the previous day in the midst of breadth favoring the bulls, and buying sentiment as revealed by Investdata’s Sentiment Report showing 86% ‘buy’ position and 14% sell volume. Total transaction volume index stood at 2.95 points, just as the impetus behind the day’s performance was strong, with MFI looking reading 94.42 points from the previous day’s 93.53 points an indication that money entered into the market.

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Index and Market Caps

At the end of Thursday’s trading, the key performance NGXASI gained 78.79 basis points and closed at 41,129.98bps after opening at 41,051.19bps, representing a 0.19% up, just as market capitalization rose by N41.06bn, closing at N21.43tr, from the opening value of N21.39tr, also representing 0.19% value gain.

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The day’s upturn was driven by accumulation in stocks like Lafarge Africa, FBNH, UACN GSK, Africa Prudential United Capital, Cadbury, Zenith Bank, Fidelity Bank UBA, Honeywell and Champion Breweries, among others, which impacted positively on Year-To-Date gain, raising it to 2.13%. Market capitalization was up by N375.48bn YTD, representing a 1.78% growth from the year’s opening value.

Mixed Sector Indices

Performance indexes across sectors were mixed, as the NGX Consumer and Industrial Goods closed higher by 0.17% and 0.15% respectively, while NGX Insurance led decliners after losing 1.13%, followed byBanking and Oil/Gas with 0.86% and 0.01% respectively.

Market breadth was positive, with gainers outnumbering losers in the ratio of 21:14, while transactions in volume and value terms were up, after stockbrokers traded 446.17m shares worth N4.47bn, compared to the previous day’s 446.17m units valued at N4.47bn. Volume was driven by trades in FBNH, GTCO, Champion Breweries Universal Insurance, Ecobank Transnational Incorporated, GTCO and Fidelity Bank.

Champion Breweries and Africa Prudential were the best performing, after gaining 9.71% and 7.18% to close at N3.05 and N6.90per share respectively on market forces and the news of the planned buyout of the retail investors by the majority shareholder, and ahead of the Q3 numbers. On the flip side, Learn Africa and ABC Transport lost8% and 5.88% respectively, closing at N0.46 and N0.32per share purely on profit taking and market forces.

Market Outlook

We expect a mixed trend being the last trading session for the week as traders book profit to  reposition for Q3 earnings season and year end, just as candlestick formation support uptrend on a high volume. It is equally noteworthy that any pullback for now is for accumulation ahead of economic data and 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 slide down by 25points to 7.25% 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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