Market Update for September 26
Thursday’s was mixed session on the Nigerian Exchange, as profit booking resurfaced in the midst of continued portfolio rebalancing and reactions to the latest rate hike by Central Bank of Nigeria (CBN), ahead of quarter-end window dressing by fund managers and market operators. All eyes are also on the Q3 earnings reporting season expected to usher in seasonality and sentiments necessary for discerning investors and smart traders to take advantage of the last quarter of the year volatility and season to create wealth. The benchmark NGX All-Share index closed lower, wiping out the previous session’s gain on low traded volume and positive market internals, after forming a topping chart patterns.
Also, sector rotation continued in the face of selling sentiment to cash out the recent gains in September recovery after the previous two months’ pullback. The current state of the market with likely continuation of trend or reversal has created opportunity to buy into real value and fairly priced companies as revealed by their half-year corporate numbers and price to earnings ratios ahead of their Q3 scorecards. As correction at this point makes equity market attractive due to sentiments associated with year-end and last quarter of every year.
Distribution and correction phases are different dynamics of stock markets that require effective strategies to navigate and follow trends. It is expected that smart money will take advantage of the low valuation in the market to buy into undervalued and defensive stocks that will support rebound as all eyes are on Q3 numbers and other macroeconomic data. Already, companies have started notifying the market of their closed period and board meeting to approval their scorecards in the new month. The pullbacks of some companies that seen profit taking or selloffs in recent days creates another opportunity for new entrants who understand the big picture and market dynamics.
The NGX index’s action has signaled weakness after running forces or strength to trade above the T-line and the two moving averages of 50-EMA and 50-SMA that indicates correction or pullbacks underway in the midst of changing market fundamentals and technicals. We note that the economic reforms of the government, measured by the outpouring of fiscal and monetary policies are yet to put the nation’s economy on the path of recovery, despite the seeming slowdown inflation and mixed macroeconomic data. There are also issues with the implementation style amid the oscillating oil production output even as the Naira continues to depreciate at a time that oil is trading below $75 per barrel at the international market.
Technically, the NGX is topping to halt uptrend, expecting another trigger to reverse up and breakout the recent resistance levels, as the state of the expected Q3 corporate numbers will determine the next direction as these scorecards start hitting the market as revealed by the candlestick formation and momentum indicators. As ADX inched down at 21.31, while RSI and Money Flow Index were mixed to read 61.15 and 75.89 points against the previous session 68.18 and 75.51 points respectively. Market players should watch this current trend and trade wisely in the face of funds entering the market on selling sentiment in some sectors and profit taking in others. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in some sectors in the midst of players digesting Q2 banking earnings, as all eyes are on Fidelity Bank and UBA results.
To navigate the rest of this quarter and beyond profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Monday, Wednesday and Friday trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent range market. Despite the oscillating volume of transaction witnessed in recent time, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
Oil prices on Thursday inched up to continue its oscillation, as it trade at $71.80 per barrel in the midst of fear of supply fading, as OPEC plan to increase production and rate cuts in US and China supporting demand, despite tropical storm and rising geopolitical uncertainties across many economies which is a threat to the global economy. This trend may likely continue for the rest of 2024, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.
Thursday’s, trading started in the green before pulling back on selloffs in highly priced stocks that was sustained for the rest of the session, despite oscillating on positioning and others, a situation that pushed the NGX’s index to an intra-day low of 98,436.83basis points from its highs of 99,175.85bps, before closing below its opening level at 98,523.56bps.
Market technicals for the session were positive and mixed with lower volume when compared to the previous session in the midst of breadth that favour the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 12% buy position and 88% sell volume. The total transaction volume index stood at 0.71 points, just as energy behind the day’s performance was strong as Money Flow Index was up to read 75.89pts, from the previous day’s 75.51pts, indicating that funds entered the market, despite closing in red.
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Index and Market Caps
At the end of the session, the NGX All-Share Index lost 463.86bps, closing at 98,523.56bps after opening at 98,987.42bps, representing a 0.47% decline. Market capitalization fell by N266.55bn, closing at N56.61tr from the previous day’s N56.88tr, representing a 0.47% value loss.
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Meanwhile, the downturn was driven by profit taking and selloffs in the shares of Okomu Oil, MTNN, Wapco, Oando, Ucap, Fidelity Bank, UBA, Honeywell and Caverton among others, which impacted negatively on Year-To-Date gain as it slide to 31.36%, while Market capitalization inched up to N11.94tr, representing 38.53% above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed with the NGX Insurance and Consumer goods index closing 0.57% and 0.21% higher respectively, while the NGX Banking index led decliners after losing 0.40%, followed by Energy and Industrial goods with 0.13% and 0.05% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 28:25, while transactions in volume and value were down after investors exchanged 344.36m shares worth N6.61bn. Volume was driven by trades in UBA, Accesscorp, Honeywell, SterlingNG and Zenith Bank.
FTNCocoa and Ellah Lakes were the best performing stocks, gaining 9.82% and 9.805 respectively, closing at N1.79 and N4.48 per share respectively on the back of market forces and expectations respectively. On the flip side, Caverton and Cadbury lost 9.73% and 9.39% respectively, closing at N2.97and N17.85per share, purely on profit taking and selloffs.
Market Outlook
We expect mixed sentiment to continue on profit taking and portfolio rebalancing ahead of quarter-end window dressing and Q3 earnings session. Also, sector rotation continues in the market, with investors taking advantage of pullbacks to buy into value.
This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
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CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
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08028164085
