Expect Mixed Trend On TB Auction Rates, Bargain Hunting, Earnings Reports

Market Update for October 26

Trading activities on the Nigerian Exchange on Tuesday were flat and quiet, despite the inflow of more corporate earnings that were positive and mixed, while the key performance index that measured activities on the exchange closed slightly higher on a low traded volume and positive breadth.

As the market consolidates its gains for the fifth successive session on increased buying interests across the major sectorial indexes to reflect the presence of buyers, more earnings reports are expected to hit the market. The inflow in equity and fixed income market was low as investors looked to midweek’s Primary Market Auction rates.

Technically, the strength behind the NGX index’s action rally is becoming stronger as revealed by the ADX reading 45.55 which is above 20 points, and the money flow index at 84.37 points on a daily chart. The composite NGX All-Share index broke out the minor and major resistance levels of 41,744.32 basis points and 41,844.16bps to test 41,868.43bps on a very high traded volume and the bullish signals by the indicators. The possibility of correction after, or during this peak of earnings season is high, with the expectation of more quarterly earnings hitting the market. The hammer candlestick formation in an uptrend index action indicates that the market is resisting a decline on a low traded volume which makes the rally somehow at the end of Tuesday trading. 

However, the state of these corporate earnings and level of liquidity in the equity space will determine how far this uptrend will go, with all eyes on oil prices, currently trading above $85 per barrel, despite the seeming oscillation at the international market, as yields direction in the fixed income market remains unclear.

Meanwhile, Tuesday’s trading opened slightly on the upside but pulled back in the midmorning to midday, which was reversed, as it oscillated on positioning and profit-taking, a situation that pushed the benchmark index to an intraday high of 41,856.59 basis points, from its lows of 41,744.38bps, before closing flat at 41,814.94bps.

Market technicals were positive but weak as volume traded was lower than the previous day’s in the midst of breadth the favouring the bulls on a mixed sentiment as revealed by Investdata’s Sentiment Report showing 63% ‘buy’ position and 37% sell volume. The total transaction volume index stood at 0.98 points, just as the impetus behind the day’s performance was strong, as Money Flow Index looked down to 78.87 points, from the previous day’s 84.37 points, indicating that funds left the market.

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The composite index NGXASI, at the end of day trading, inched up slightly by 0.20 basis points and closed at 41,814.94bps after opening at 41,814.74bps, representing a 0.0005% up, just as market capitalization rose by N10bn, closing at N21.82tr, from the opening value of N21.82tr, also representing 0.0005% value gain.

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Tuesday’s upturn was as a result of demand for stocks in, Lafarge Africa, Unilever, UACN, Ecobank Transnational Incorporated, PZ Cussons, University Press, International Breweries, and NPF Microfinance, among others. This impacted mildly on Year-To-Date gain that increased to 3.83%. Market capitalization stood at N764.55bn YTD, representing a 3.63% growth from the year’s opening value.

Bullish Sector Indices

Performance indexes across sectors closed higher, except the NGX Oil/Gas index closed lower by 0.38%, while the NGX Insurance led the advancers after gaining 0.51%, followed by Banking, Consumer and Industrial Goods with 0.04%, and 0.04%respectively.

Market breadth was positive, as gainers outnumbered losers in the ratio of 22:21, while transactions in volume and value terms were down, as stockbrokers traded 353.23m shares worth N5.57bn, compared to the previous day’s 674.50m units valued at N7.59bn. Volume was driven by further heavy trades in FBNH, GTCO, Universal Insurance, UBA, and Transcorp.

Universal Insurance and University Press were the best-performing stocks after gaining 10% each to close at N0.22 and N1.65 per share respectively on market forces. On the flip side, ABC Transport and FTN Cocoa lost 8.82% and 6.25% respectively, closing at N0.31 and N0.45per share purely on profit-taking.

Market Outlook

We expect a mixed trend on TB auction rates today and bargain hunting on more earnings releases, just as reactions to these positive numbers persist. Also, candlestick formation and volume traded at the end of Tuesday trading revealed that the trend was intact as institutional players are not selling yet. It is equally noteworthy that any pullback at this level is for the accumulation of more positions ahead of year-end seasonality. 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, the outcome of the Treasury bill auction was 91 and 182 days tenor rate remained unchanged and 364 days slightly down by 25 points to 7.25% for a whole one year ahead of earnings season portfolios repositioning. Also, investors are still observing the interplay of forces in the FX market as the CBN’s new digital currency platform. The day’s low volume suggests that institutional investors are not making a sell 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 for companies like Total, Seplat, Okomu Oil, Presco, Lafarge Africa, and others.

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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605