Market Update for November 6
Selloffs resurfaced on the Nigerian Exchange at midweek, as the composite NGX All-Share index suffered a pullback that wiped out its gain from previous session, after sell pressure hit highly capitalized stocks and blue chip companies. This was amid high volatility and continued portfolio rebalancing among market players on the strength of Q3 corporate numbers and others factors, even as the imminent return of President Donald Trump to the U.S. While House signals a shift in global economic dynamics. Following from his victory in Tuesday’s poll, trade tension is likely to resurface under his presidency, especially given that the U.S. remains the largest economy in world today. Trump’s return to the White House is expected to favour the global financial and industrial sectors among others, even as all eyes are on the upcoming Fed’s policy meeting, being the last for the year 2024.
The Nigerian equity market pulled back again after trying to rebound on Tuesday, indicating that the NGX is searching for direction and has created buy opportunities for bargain hunters who understand the dynamics of stock markets and importance of buying low and selling high. This particularly true now that many stocks on the exchange are undervalued with high upside potentials, as investors and traders digest the recently submitted quarterly earnings reports that revealed the states of various companies on the NGX. Already, many companies reported better than expected Q3 numbers that reveal value with high possibility of higher payout at the end of the current financial year as sector rotation continue in the midst of positioning for year end.
Nevertheless, the ongoing price correction that hit many stocks and some blue chip companies weighed on the index, even as strength and weakness are somehow on the exchange now, on the back of momentum and volume traded. These was also the impact of the slight negative market breadth, even as the NGX try to resist further decline, retracing up after breaking down various psychological lines of 99,000, 98,000 and 97,000 mark waiting to reverse. The index has formed a bottom reversal chart pattern that signals an uptrend in a markdown phase, which needs confirmation as trading opens on Thursday.
As the year 2024 winds down, sector rotation and portfolio rebalancing will persist, especially as numbers from the services sector and few others remain outstanding. As these strong support levels, market players are repositioning their portfolios along sectors and companies with potentials to release positive numbers on the strength of their earnings power at the end of Q4. Also, seasonal trends are likely to repeat themselves in these last months of the year which comes with seasonality and sentiment that makes it very important to market players across the globe. This is especially as retracement from strong support level of 96,684.90 basis points and 96,597.70bps after forming a bottoming tail and uptrend candles. This created the perfect setup for high probability swing trade to catch end of year repositioning.
The NGX index’s action trades below the T-line and above the two moving averages of 50-EMA and 50-SMA, this indicate weak momentum and somewhat in the midst of changing market fundamentals and technical as reflected at the end of Tuesday trading. 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. 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 slightly above $75 per barrel at the international market.
Technically, the NGX is on downtrend and bearish in the midst of selling sentiment, impressive earnings and improving transacted volume that signaled selloffs and buying interest around strong support levels of 96,597.79bps and 96,674.35bps. Just as candlestick formation and momentum indicators had revealed somewhat weakness in the market. As ADX is looking up at 20.49, while RSI and Money Flow Index were down to read 37.98 and 29.24 points against the previous session 40.45 and 29.95 points respectively. Market players should watch this current trend and trade wisely in the face of funds leaving the market on selling sentiment in some sectors and buying interest in others. Also, trading volume pattern continued to oscillates, suggesting position taking and selloffs in the market amid players digesting the corporate earnings and policy direction of the government that look confused.
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Oil prices at midweek inched up to continue its oscillation, trading at $75.53 per barrel in the midst of weak dollar and Trump victory at US presidential election. Even as the ongoing geopolitical tensions and conflict in the Middle East. As demand outlook remained mixed in the midst of rate cuts by the major central banks of the world and OPEC delaying output increase to January 2025. The rising geopolitical uncertainties across many economies remains a threat to the global economy and energy consumption. 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.
Midweek’s trading started in the downside and it was sustained for the rest of the session, on selloffs in highly priced stocks and blue chip companies. This situation pushed the NGX’s index to an intra-day low of 96,567.24bps from its highs of 97,123.60bps, before closing below its opening level at 96,567.24bps.
Market technicals were mixed and weak with lower volume when compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 6% buy position and 94% sell volume. The total transaction volume index stood at 0.88 points, just as impetus behind the day’s performance was weak as Money Flow Index inched down to read 29.24pts, from the previous day’s 29.95pts, indicating that funds left the market.
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Index and Market Caps
At the end of midweek’s trading, the benchmark NGX All-Share Index shed 556.37 basis points, closing at 96,567.24bps, after opening at 97,123.61bps, representing a 0.57% decline. Market capitalization fell by N337bn, closing at N58.51tr from the previous day’s N58.85tr, representing a 0.57% value loss.
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Meanwhile, the session downturn was driven by selloffs and profit taking in the shares of Airtel Africa, Oando, UBA, GTCO, Nascon, Chams, Transcorp and Honeywell, among others. This impacted mildly on Year-To-Date gain as it inched up to 29.16%, while Market capitalization gain stood at N14.21tr, representing 43.64% growth over its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Banking and Consumer goods index closed lower by 0.92% and 0.13% respectively, while the NGX Oil/Gas led advancer after gaining 0.80%, followed by Insurance and Industrial goods with 0.49% and 0.03% respectively.
Market breadth turned slightly negative, as losers outnumbered gainer in the ratio of 21:20, while activities in volume and value were down after investors exchanged 418.39 million shares worth N10.04bn. Volume was driven by trades in SterlingNG, UBA, Accesscorp, Jaiz Bank and Veritas Kapital.
Eunisell and Regency Insurance were the best performing stocks, gaining 9.87% and 9.30% respecitively, closing at N7.46 and N0.47 per share respectively on the back of sentiment and market forces respectively. On the flip side, UBA and Oando lost 9.99% and 9.98% respectively, closing at N31.55 and N65.40per share, purely on selloffs and profit taking.
Market Outlook
We expect mixed sentiment to continue on low valuation, profit taking and positioning. Also, sector rotation and portfolio rebalancing 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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- The Place Of Corporate Earnings In Trading & Investing For Retirement
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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
