Improved Momentum Seen On Realignments, Ahead Of Sept CPI, Q3 Earnings

Market Update for October 9
The up and down movement on the Nigerian Exchange continued on Monday, as the benchmark NGX All-Share index closed higher, wiping out losses of the previous session on increased buying interests in highly capitalized stocks and blue chip companies. Trading for the week, therefore, opened on a positive note, as bargain hunters continued to take advantage of the recent pullbacks, repositioning their portfolios ahead of the Q3 earnings reporting season that is around the corner. Also, the market is looking forward to policy statements from the fiscal and monetary authorities as the new minsters and apex bank leadership roll out economic plans, or agenda to put the economy on a growth path.
The recent breakout of another geopolitical tension in the middle east, will continue to drive global and domestic market volatility, so market players anywhere in the world should factor in this uncertainty in their trading and investment plans always. The NGX index’s action maintained a positive and strong momentum on a low traded volume and positive market breadth, staying within the consolidation range above the T line. More companies continue to announce their closed period for Q3 financials which are expected to start pouring in, any moment from next week for early filers. The index’s action adjusted up after the previous session’s selloffs and profit booking.
Amidst raging concerns over macroeconomic headwinds in the country today, Q3 earnings reports are expected to remain mixed due to the ongoing reforms by government, at a time of lingering foreign exchange challenges, with the Naira already crossing the N1,000/US Dollar threshold. Owing to the cautious environment pervading the nation’s equity market, it is important that you trade and invest wisely ahead of events and factors that will shape the market in the final quarter of this year. Despite the mixed sentiment witnessed so far, the market’s big uptrend remains intact at above the 50-Day Moving Average, despite testing it in the midst of a material shift in the index and the ongoing volatility.
The NGX consolidated on recent gains as witnessed at the end of Monday’s trading creating bargain opportunities in the market, but investors should trade consumer and industrial goods stocks with caution, while repositioning portfolios, targeting services industry stocks with strong fundamentals and earnings power capable of supporting price, and higher dividends payment at the end of the year. These are against the backdrop of the changing market conditions and trading environment due to macroeconomic headwinds, mixed corporate earnings. Others are the prevailing mixed outlook for fixed income instruments yields and rates in the face of rising inflation, high interest rate and exchange rate challenges due to the high volatility in the exchange. However, candlestick formation at the end of the session signals a bearish pattern that supports downtrend, just as the 2008 resistance level turned another strong support level to watch.
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Oil price oscillation continued, pulling back to trade at $87.57 per barrel in the midst of middle east conflict, stronger US Dollar and dovish comment of Fed, in the face of production cuts in some oil producing nations and inflation waves that may affect crude demand. The Russia-Ukraine war remains a major concern, the prevailing high interest rate regime and slowing inflation. Also, supply tightened due to the Russia-Ukraine conflict that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Meanwhile, Monday’s trading opened in the upside which was sustained throughout the session, on position taking in blue chip companies and others, a situation that pushed the Index to an intraday high of 67,123.22bps from its lows of 66,454.57ps, before closing above its opening figure at 67,101.33bps.
Market technicals were positive and mixed with a lower volume traded, when compared to the previous session, in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 97% buy position and 3% sell volume. The total transaction volume index stood at 0.47 points, just as the energy behind the day’s performance was weak, with Money Flow Index reading 42.85pts, from the previous day’s 33.82pts, indicating that funds entered the market.
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Index and Market Caps
At the close of Monday’s trading, the NGXASI gained 646.76bps, closing at 67,101.33bps, from its 66,454.57bps opening level, representing a 0.97% growth. Market capitalization also rose by N355.5bn to N36.86tr, from the previous day’s N36.51tr, which also represented a 0.97% appreciation in value.

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Monday’s upturn was driven by buying interests and accumulations in BUA Cement, Dangote Sugar, Wapco, NB, CWG, Champion Breweries, Oando, Nahco and CHI Plc among others. This impacted positively on Year-To-Date gain which increased to 30.93%, while Market Capitalization YTD gain stood at N8.09tr, representing a 33.84% rise above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes were in green, except for NGX Banking that closed in red with 0.44%, while NGX Industrial goods led the advancers after gaining 4.03%, followed by, Insurance, Consumer goods and Energy with 1.23%, 0.78% and 0.036% respectively.
Market breadth was positive as gainers outpaced losers in the ratio of 26:23, while activities in volume and value terms were down, after players exchanged 268.66m shares worth N3.46bn, driven by trades in ABC Transport, Accesscorp, Oando, UBA and Transcorp.
BUA Cement and Consolidated Hallmark Insurance were the best performing stocks, gaining 10% and 9.80% respectively, closing at N103.40 and N1.12 per share respectively, on market forces and Q3 earnings expectation. The latest decision by BUS Cement to reduce price of its primary product is expect to result in increased market share arusing from improvement in demand that would translate to better top and bottom line in Q4. On the flip side, Prestige Assurance and FTNCocoa lost 10% and 8.33%, closing at N0.45 and N1.65per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect mixed sentiments and the improving momentum to continue on bargain hunting and portfolio repositioning ahead of September CPI and Q3 corporate earnings reports in the face of sector rotation, with all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.
However, pullbacks are creating ‘buy’ opportunities amidst the economic reforms of the government, just as more policy pronouncements and economic managers hit the ground running, a situation expected to offer investment direction eventually.
We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price rally to take profit, while also looking at the trends and events across the globe and domestically.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605