Investors Bet On Fiscal, Monetary Policy Direction, As Potfolio Rebalancing Continues On NGX

Market Update for November 7

Tuesday’s trading on the Nigerian Exchange had a mixed session, sustaining its bullish momentum with the NGX All-Share index closing higher on a very high traded volume and buying sentiment in the face of a marginal negative market breadth. As a result, the bull transition was extended for a third consecutive session, amid reactions to the better-than-expected corporate earnings and portfolio rebalancing even as higher yields in the fixed income market continue, while all eyes remain on the expected data such as the October inflation, Q3 GDP and policy committee meeting coming later this month. These will offer investors and analysts a clear direction of the economy in the midst of dynamics that November the month of November has been associated with, and, of course, the usual year-end seasonality.
While market players and institutional investors continue to digest the latest corporate earnings to reposition their portfolios ahead of year end, there is also the need to look at the impact of the mixed outlook in money and bond market yields due to the rising inflation for which slowdown is not in view. This is due to the heightening insecurity following across the nation, for which many countries have issued travel advisory on where to go, or avoid in Nigeria, which is not good for the economy. To hedge against this high inflation in the country, the equity space remains attractive to investors, judging by the huge returns recorded year-to-date.
The bullish sentiment witnessed on Tuesday was revealed by the Money flow index and candlestick formation, as the index hit again a new all-time high of 70,613.60 after testing 70,625.53 to extend the markup phase. So, continuation or reversal needs to be confirmed as the market opens for midweek trading, as the index trades above the T-Line to signal strong momentum on a very high traded volume and volatility.
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Oil price oscillation continued, as it falls further to trade at $81.60 per barrel in the midst of US inventory buildup, weak trade data from China and others in the face ongoing middle east conflict. Despite the rate pause by central banks and cooling inflation. As geopolitical tensions across the globe continued to rise, at a time the Russia-Ukraine war entered its second year, and remains a major concern. The supply tightened due to the Russia-Ukraine will drive up and down movement in oil price, which also drive market volatility across the globe.
Meanwhile, Tuesday’s trading started slightly in the green but pulled back at the midday on profit taking, before retracing up in the afternoon on increased buying interest in blue chip stocks. This pushed the Index to an intraday high of 70,625.53bps from its lows of 70,456.92ps, before closing above its opening figure at 70,613.60bps.
Market technicals were positive and mixed with a higher volume traded, when compared to the previous session, in the midst of breadth favouring the bears on a buying sentiments as revealed by Investdata’s Sentiments Report showing 93% buy position and 7% sell volume. The total transaction volume index stood at 1.25 points, just as the energy behind the day’s performance was strong, with Money Flow Index reading 71.80pts, from the previous day’s 71.41pts, indicating that funds entered the market.
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Index and Market Caps
The benchmark NGX All-Share Index at the end of trading gained 133.98bps, closing at 70,613.60bps, from the 70,479.62bps opening level, representing a 0.20% growth. Market capitalization rose by N85.45bn, closing at N38.80tr, from the previous day’s N38.71tr, which also represented a 0.20% appreciation in value.
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The upturn was driven by position taking in the shares of PZ, GSK, FBNH, NB, Fidelity Bank, Wapco and Japaul Gold, among others, impacting positively on Year-To-Date gain which inched up to 37.78%, while Market Capitalization YTD gain stood at N10.53tr, representing a 39.46% rise above its opening level for the year. Market cap was impacted by the listing of four billion ordinary shares of Mecure Limited at N2.96 each.

Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Energy index closed 0.27% lower, while NGX Consumer Goods led the advancers after gaining 0.31%, followed by Insurance and Industrial goods with 0.15% and 0.03% respectively. Just NGX Banking finished flat.
Market breadth was marginally negative as losers outnumbered gainers in the ratio of 24:22, while activities in volume and value terms were mixed, after players exchanged 449.28m shares worth N5.44bn, driven by trades in FBNH, CHI Plc, Fidelity Bank, UBA and Japaul Gold.
PZ and GSK were the best performing stocks, gaining 10% and 9.93% respectively, closing at N4.07and N2.22per share respectively, on market sentiment and the premium being offered by the board ahead of the planned delist of its entire shares in issue from the main board. On the flip side, NNFM and Royal Exchange Assurance lost 10% and 9.26%, closing at N18.00 and N0.49per share, purely on the back of profit taking.

Market Outlook
We expect mixed sentiments on profit taking and portfolio rebalancing on the strength of the better-than-expected corporate numbers released so far in the face of sector rotation and mixed outlook in yields space. Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.

Take Action

Invest 2024 Traders & Investors Summit 
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5. Understanding Commodity Markets For Profitable Portfolio Diversification in 2024 
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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605