Expect Rebound On NGX, Amid Q3 Window Dressing, As Oil Price Rally Above $80

Market Update September 28

The nation’s equity market on Tuesday closed flat as prices of stocks recorded a mixed trend to reflect the ongoing portfolio reshuffling and end of the quarter window dressing, just as the month of September is likely to close in the red, except there is a turnaround today and tomorrow being the last trading sessions of the month.

The high volume traded as driven by Honeywell Flourmill on a slight negative breadth, still indicates some strength, with buying sentiments ahead of Q3 earnings reporting season remained high as revealed by investors ‘buy’ volume of 75% against sell position of 25% during the session. Just as the money flow index indicates the entrance of funds into the market as it reads 48.59 points from the previous day 34.47 points. 

Value and growth investing among discerning players continued on the exchange amid buying interests and positive sentiments for undervalued stocks and sectors with high upside potentials to rally on uptrend earnings and expected impact of inflation and high exchange rates on the industries and companies.

With oil prices topping $80 per barrel in the international market, the nation’s external reserves now looking up despite the low output should support the forex market liquidity, even as Oil/Gas stocks are becoming attractive to players, while positive sentiment for the sector is on the increase ahead of the Q3 earnings season and last quarter reports. There is the seemingly ambitious projection of oil price hitting $90pb before the end of 2021, even as the seasonality that supports high consumption of energy and fuel is around the corner.

Technically, the seeming divergence between the NGX index action and MACD histogramme suggests that markup by smart money is underway, which we wait to confirm during the midweek’s trading and tomorrow because the bear is gradually taking over the market ahead of Q3 numbers. Tuesday’s trading opened flat and oscillated on selloffs and ‘buy’ interests in high, medium, and low-priced stocks, pushing the NGX index to an intraday low of 38,841.84bps, from its highs of 38,864.56bps, after which it closed slightly below the opening figure at 38,858.99bps.

Market technicals were positive but mixed with higher volume traded than the previous day, in the midst of a slightly negative breadth and positive sentiments as revealed by Investdata’s Sentiment Report showing 75% ‘buy’ volume and 25% sell position. Total transaction volume index stood at 2.19 points, just as the momentum behind the day’s performance was relatively weak, as Money Flow Index looked up at 48.59points, from the previous day’s 34.47points, indicating that funds entered in, despite the flat market.

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Index and Market Caps

The key performance NGX All-Share 1ndex, at the end of the day trading, slipped by a marginal ‘5.34 basis points to close at 38,858.99bps from an opening figure of 38,884.33bps, which represented 0.01% drop, just as market capitalization fell by N2.78bn, closing at N20.25tr, from the opening value of N20.25tr, also representing 0.01% value loss.

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The day’s downturn was due to selloffs and profit-taking in Zenith Bank, Access Bank, FCMB, and Africa Prudential, among others, which impacted mildly on Year-To-Date loss that inched up to 3.51%. This was just as the cumulative loss in market capitalization stood at N791.42bn, representing a 3.80% decline from the year’s opening value.

Mixed Sector Indices

Performance indexes across sectors were mixed, with the NGX Insurance and Banking index closing 3.39% and 0.30% down respectively, while the NGX Consumer Goods Index led the advancers, after gaining 0.10%, followed by the Oil/Gas and Industrial Goods with 0.04% and 0.02% respectively.

Market breadth was slightly negative, after losers outnumbered gainers in the ratio of 15:14, while activities in volume and value terms rose after investors exchanged 526.30m shares worth N3.04bn, compared to the previous day’s 139.45m units valued at N1.27bn. Volume was driven by trades in Honeywell Flourmill, UBA, Transcorp, Fidelity Bank, and Wema Bank.

Skypower Aviation and Wema Bank were the best performings, gaining 9.88% and 5.13% to close at N4.45 and N0.82 per share respectively on market forces. On the flip side, Mansard insurance and Africa Prudential lost 9.70% and 8.59% respectively, closing at N2.70 and N5.85 per share purely on selloff and profit-taking.

Market Outlook

We expect the rebound on quarter-end window dressing, rallying oil price above $80, and Q3 earnings expectation, just as investors and traders take advantage of pullback to position ahead of the earnings reporting season. Also noteworthy is the fact that many stocks are trading within their buy ranges, a situation expected to attract 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 ahead of the month and quarter-end, as well as the continued repositioning of portfolios for the year’s last quarter. Also, investors are still observing the interplay of forces in the FX market as the CBN gives a guideline for the new digital currency platform. The day’s low volume suggests that institutional investors and others are still cautiously looking at the economic data and policy direction of the economic managers. It is noteworthy that oil price pullback in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.


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