Market Update for September 17
Trading activities on the Nigerian Exchange opened for the week Tuesday on a positive note, after the public holiday on Monday to mark the Islamic Id-el Maulud festival. There was mixed sentiment of buying and selling as market players digest the recent Consumer Price Index that moderated for the second time this year to 32.15% from 33.40% in July, amid the harvest season. The numbers may have been better but for the imported inflation arising from the weakening Naira, worsening insecurity and upward adjustment in fuel prices by government.
The benchmark NGX All-Share Index closed higher on the back of increased bargain buying across some major sectors of the market that impacted positively on the index in the midst of low traded volume and positive market internals, wiping away previous session’s loss, thereby forming a top chart pattern that signal reversal or continuation trend depending of market forces as trading opened on Friday.
We note the seeming slowdown in inflationary pressure, and decline in fixed income market yields as reflected in the TB primary market auction that witnessed a slide in rates for three consecutive auctions. Is this a pointer that the CBN Monetary Policy Committee in the upcoming meeting may leave the benchmark rate unchanged to watch things unfold in the economy? Knowing that higher energy prices and power tariff will put pressure on inflation which may lead to higher interest rates with likely negatively impact on the equity market and the larger economy. The continued mismatch government policies today, shows that fiscal and monetary authorities are not working together to put this nation economy in the path recovery and growth.
There is also buying sentiment in consumer goods and banking stocks with the market looking forward to the interim dividend income from Accesscorp, UBA and Fidelity Bank, now that others have given an insight into what should be expected. As the market extend its markup phase, with players taking positions in the hope of quarter end window dressing and Q3 earnings reporting season in October. The current state of the NGX presents an opportunity to buy into undervalued and fairly value companies as revealed by their half-year corporate numbers and price to earnings ratios. The recovery and accumulation phase are different dynamics of the market that require effective strategies to navigate and follow the trend. It is expected that smart money will take advantage of low valuation in the market to buy into value and defensive stocks to support this rebound.
The NGX index’s action is showing strength trading above the T-line and 50-EMA, even when it is below 50-SMA that indicates somewhat weakness 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 progress. 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 broke out a strong resistance level to form top reversal chart pattern in the face of buying sentiments and profit taking as revealed by the candlestick formation and momentum indicators. The ADX is looking down at 21.46, while RSI and Money Flow Index were up to read 57.74 and 78.41 points against the previous session 55.44 and 78.30 points respectively. Market players should watch this current trend and trade wisely in the face of funds entering the market on position taking in some sectors. Also, trading volume pattern continued to oscillates, suggesting buying interest and selloffs in some sectors in the midst of players digesting banking earnings and consumer price index report.
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 Tuesday were stead, to continue its oscillation, trading at $73.62 per barrel in the midst of increase in US inventories and OPEC delay plans to increase production. As Fed is set to cut rates in the ongoing policy meeting for the first time since 2020. Even as rising geopolitical uncertainties across many economies 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.
Tuesday’s trading started in the upside and was sustained for the rest of the session, despite oscillating on profit taking and buying interest in blue chip companies and others, a situation that pushed the NGX’s index to an intra-day high of 97,723.20 basis points from its lows of 97,256.27bps, before closing above its opening level at 97,685.64bps.
Market technicals for the session were positive and mixed with higher volume 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 92% buy position and 8% sell volume. The total transaction volume index stood at 0.96 points, just as energy behind the day’s performance was strong as Money Flow Index was up to read 78.41pts, from the previous day’s 78.30pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Tuesday, the composite NGX All-Share Index gained 229.02bps, closing at 97,685.64bps after opening at 97,456.62bps, representing a 0.23% growth. Market capitalization rose by N132bn, closing at N56.05tr from the previous day’s N55.86tr, representing a 0.23% value gain.
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Meanwhile, the upturn was driven by buying interest and accumulation in the shares of Geregu Power, Flour Mills,GTCO, FBNH, Accesscorp, Dangote Sugar and Nascon among others. This impacted positively on Year-To-Date gain that increased to 29.76%, while Market capitalization inched up to N11.27tr, representing 37.19% above its opening level for the year.
Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Banking and Consumer goods index close higher by 1.45% and 0.94% respectively, while the NGX Insurance index led decliners after losing 1.52%, followed by Energy and Industrial goods with 0.62% and 0.01% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 26:24, while transactions in volume and value were up after investors exchanged 471.3m shares worth N9.4bn. Volume was driven by trades in Japaul Gold, Transcorp, FBNH, UBA and Oando.
FBNH and Flour Mills were the best performing stocks, gaining 10% each, closing at N31.90 and N59.95 per share respectively on the back of market forces and expectations respectively. On the flip side, Eterna and Oando lost 10% and 9.90% respectively, closing at N27.90 and N80.20 per share, purely on profit taking.
Market Outlook
We expect mixed sentiment to continue as players digest CPI of 32.15% in the midst of profit taking and bargain hunting in the hope of an inflow of the half-year numbers from the other interim dividend paying stocks, as sector rotation continues in the market. Portfolio repositioning is however continuing, 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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