Market Update for the Week Ended September 6 and Outlook for September 9-13
The first full trading week in September had a mixed trend on the Nigerian Exchange, closing lower, halting the previous week’s bullish outing as the NGX joined its counterpart across the globe. This was somehow expected given the prevailing mixed macroeconomic data such as the U.S jobs report, EU Purchasing Managers’ Index, China’s stimulus policies to revamp its property market and projection by the Russian central bank that the country’s GDP could drop by as much as 4.0% in 2025. All of these weighed on the MSCI World equity index which fell by 1.8% in the week under review.
Back home, the mixed performance was driven by selloffs and profit taking across some major sectors of the market and blue chip stocks which impacted negatively on the benchmark NGX All Share Index as it closed lower on a low traded volume and negative market breadth to halt recovery, even as the month of September remains a dicey one that creates opportunities for portfolio rebalancing and positioning for the last quarter of the year. Looking at price action and candlestick formation on a multiple time frame indicates possibility of reversal which is a function market forces in the new week.
All eyes are on consumer price index for August in the midst of changing fundamentals in the oil and gas sector of the nation economy, with the announcement of the commencement of Premium Motor Spirit (petrol) production by the Dangote Petroleum Refinery. This should offer an opportunity for the Nigerian Government to rethink its policies around energy, oil and gas to drive economic production and growth momentum ahead of the Central Bank of Nigeria’s policy meeting in the coming weeks. This is where the fiscal and monetary authorities should shake hand to address the nation’s lingering hyperinflation challenge, especially with insecurity already a priority of government at all levels. This is the time to chart a new course for the nation’s economy and progress.
The seeming improvement in remittance numbers, if sustained, is likely to address the lingering shortage in FX, especially if crude oil production increases to the two million barrels per day level, as efforts are intensified to improve the export potential of the non-oil sectors. This will be made possible through supportive fiscal and monetary policies to boost FX liquidity that will impact prices positively and keep inflation in the southward movement. Nigeria’s economic managers are seeming overwhelmed by their positions and are not providing or formulating the right policies necessary at this time to address the economic challenges, even with increasing policy somersaults and poor implementation style.
The NGX’s volatility and mixed trends were due to portfolio reshuffling and sector rotation on the back of corporate earnings and recent happening in the market and economy at large. As selloffs in banking, insurance, consumer and industrial goods had created opportunities for market players. Since every investment is against the future expectation, government policies, company information, macroeconomic data and others that influence prices in the short to long-term should guide your investment decisions as you follow the trends and changes in the market. Better understanding of the big picture of the market and our actions as market players in any market cycle would determine your results or returns ultimately.
The changing momentum and sentiment of the market today as players digest quarterly earnings, slowdown in inflation and TB auction rates. As all eyes are on the banks for 2024 half year interim dividend announcement. Despite the rising economic headwinds being witnessed today, there is also the ongoing economic reforms of the government and challenges in the exchange market which continue to impact investor confidence with the unfolding economic policies.
Technically, the market still weak, as NGX index action trades below the T line on a weekly chart but above 50 SMA and EMA for same period. With indecision candlestick formation at the end of the week under review, the possibility of reversal or continuation of trend is high in the new week. The sentiment report for the period revealed a selling sentiment of 37% buy position and sell volume of 63% as MFI looked down slightly to reads 56.17 points which indicates that funds left the market during the week. The negative market internal for the period occurred in the midst of position taking and selloffs. As bargain hunters took advantage of pullbacks to buy into fundamentally sound companies with high yield, strong earnings power and low valuation.
To navigate the rest of Q3 market volatility and its mixed outlook profitably using fundamental and technical analyses to run, join Investdata’s Live Sessions at noon every Mondays, Wednesdays and Fridays. Also, get investdata’s 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 corrections and pullbacks to continue the markdown phase. As volume of transaction witnessed within the week remain high, it is time to go shopping for undervalued stocks, sector rotation and the next insider dealing opportunity.
Oil price during week recorded lost, as it fall to 11 months low to trade at $71.02per barrel following weak global demand outlook in the midst of OPEC delaying output hike and ongoing conflict in the middle East. As increasing geopolitical tensions around the world threats supply, coupled with ongoing war in Ukraine and Russia disrupting oil output in the face of Fed likely to cut rates in their next policy meeting. The up and down movement of oil price has continues to drive volatility across different investment windows and inflation that is slowing down in mature economies.
Movement Of NGXASI
The bears resurfaced on the NGX last week, after recording mixed performance of three sessions of up market and two days of negative outing to close below the T line on a low traded volume and negative market internals in the face of selling sentiment during the period.
Trading for the week opened on a positive note, extending the previous gain position as the index close higher by 0.22% on Monday, this trend was sustained on Tuesday when the market inched up with 0.08%, before the reversal at the midweek on profit taking and selling sentiment as the benchmark index shed by 0.35%, the trend was sustained on Thursday when the NGXASI lost 0.34% on profit taking in Oando and others. The market rebounded on Friday as the index gained 0.23%, bringing the week’s total loss to 0.15%, compared to the 1.55% gain in the previous week.
In all, the composite NGX All-Share Index slipped by 146.01basis points, closing at 95,433.53bps, from previous week’s 96,579.54bps closing level, after touching an intra-week low of 96,092.31bps from a highs of 97,005.19bps. Market capitalisation fell by N83.8 billion to close at N55.4tr, representing a 0.15% value loss.
Top advancers’ table for the week was dominated by medium and low priced stocks in the midst of selling sentiment and position taking in some other growth and undervalue stocks ahead of more banking results hitting the market and inflation data. Also notable was the fact that market players were taking advantage of the pullbacks to reposition their portfolios and carrying out sector rotation.
Market technicals for the period were negative and mixed as revealed by volume and market breadth, with decliners outnumbering advancers in the ratio of 45:35 on a selling sentiment as indicated by investdata sentiment report showing 37% ‘buy’ volume and 63% sell position. Money Flow Index was down at 56.17 points from the previous week’s 56.30 points, an indication that funds left the market on a weekly time frame.
Technical View
The NGX index’s action at the end of the week formed indecision candlestick pattern that signaled trend reversal or continuation, which needs to be confirmed in the new week, as all eyes are on the other dividend paying banks to published their financial, as well as macroeconomic reports that are expected to hit the the market in the face of changing momentum and sentiment, especially from the oil and gas companies. Selloffs hit some blue chip companies, despite the buying interest in low valuation and interpretation of decline in TB auction rates, even when higher yields in the alternative market still remain below inflation rate.
Bearish Sectoral Indices
The sectoral indexes of the week were down, except for NGX Oil/Gas that closed in the green, while NGX Insurance Index led the decliners after losing 4.5%, followed by Consumer, Industrial goods and Banking with 1.2%, 0.20% and 0.10% respectively.
Transactions in volume and value were mixed, as players exchanged 2.13bn shares worth N33.05bn, compared to previous week’s 2.82bn units valued at N42.16bn. Volume was driven by Financial Services, Oil/Gas industry and Services industry, boosted specifically by Accesscorp, Oando, Zenith Bank, FBNH and Transcorp.
Industrial Medical Gases and Berger Paints were the best performing stocks during the week, gaining 32.6and 31.1% respectively, closing at N35.00 and N18.75 per share on market forces and sentiment. On the flip side, RT Briscoe and FTNCocoa lost 27.6% and 18.4% respectively, at N2.57and N1.51 per share, on profit taking and selloffs.
Outlook for the week
We expect a mixed sentiment to continue on bargain hunting and sector rotation. Also, as more banks earnings reports are likely to hit the market in the face of portfolio rebalancing. As players take advantage of pullbacks to buy into value stocks. As investors are watching with rapt attention.
However, retracement to the 96,000bps level and below is possible on correction as global and domestic events unfold.
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