Mixed Sentiments Ahead, As Cautious Investors Digest Inflation Data, Bet On MPC Meeting Outcome
Market Update For November 17
The seesaw movement on the Nigerian Exchange continued Thursday, as the key performance NGX All-Share index closed flat again on a mixed sentiment and low traded volume in the midst of profit taking and negative market breadth, just as relative strength returned to blue-chip and growth stocks on the exchange.
Also, market players continued to digest the corporate earnings and the latest inflation figure to reposition their portfolio and hedge against the rising inflation in some stocks with high dividend yields and strong earnings to support higher payout as financial year end of many companies draw closer. As improving buy volume in some banking stocks indicates price markup by smart money any moment from now, as the negative real returns in the fixed income market deepened as revealed by the October headline inflation numbers.
The consumer price index is likely to remain on the northward direction in this last two months of the year, due to the festive period around and increasing demands for goods and services in the face of continued depreciation of the Naira, which continues to heighten the cost of imported goods, and the increasing cost of production.
Investors are also reassessing the future of the MPR hike by the Central Bank of Nigeria (CBN) ahead of Q3 GDP figure and impact of its currency redesign to control money in circulation, as all eyes are on the outcome of its last Monetary Policy Committee meeting for this year holding next week. That meeting is expected to shape market direction in the midst of the better-than-expected corporate earnings and low prices of stocks that created real opportunities for fresh entrance ahead of year-end seasonality.
The flat position of the market signals crossover in the face of pulled backs in majority of sectorial indexes, at the oversold state of the market is offering entry opportunities for discerning investors in the face of improving momentum. We also note the fact that many players, including the institutional investors are still holding cash to confirm market direction, especially given the anticipated financial market reset in 2023, and beyond expected to create wealth for discerning investors.
Technically, at the end of Thursday’s trading, some indicators revealed a new uptrend as NGX index trades flat on T line and 20-day moving average, but need a follow through to confirm the latest rebound as the market opens Friday morning, just as companies’ actual numbers continue to guide investors’ decision on portfolio alignments, amid increasing transaction volume that has become noticeable in some sectors and stocks, ahead of year-end seasonality and others events that are likely to give the market direction. Most stocks have touching their 52-week lows and some tending towards their year-to-date low, creating more entry opportunities for discerning investors.
Already, we are in the second half of Q4, so the prevailing dividend yields and prices are currently low, supporting the potential for a 3-5% Santa Claus rally, knowing that market pullback was driven by the CBN’s rate hikes and others factors like the 2023 general election, insecurity and exchange market problem. At the end of the day, the next outcome of MPC meeting could trigger the news-based market movements. As technical traders, we must not make decisions based on the news only. We do, however, have profit targets and stop loss in place to protect our investments from wild market swings that are caused by news.
To navigate the rest of the year profitably using fundamental and technical analysis to run, join investdata live sessions at noon every 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 mixed sentiment witnessed, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.”
Oil price continued its oscillation, pulling back again to trade at $90.34, in the midst of geopolitical tension and fear of recession as a result of high interest rate and inflation across the globe. Also supply tighten due to the Russia-Ukraine war that has been lingering, coupled with the impact of hawkish monetary policy by central banks, just as China’s COVID-19 lockdown issues are becoming confusing. The up and down movement of oil price also continues to drive volatility. Despite the bailout package of the Chinese government to simulate economic activates and stabilize employment, as well as that of Germany aimed at managing the energy crisis.
Meanwhile, Thursday’s session started slightly in the green but pulled back to oscillate for the rest of the session on profit taking and buying interest in some value stocks that had suffered losses recently, a situation that pushed the NGX’s index to an intraday low of 43,969.57bps from its highs of 44,052.82bps before finishing slightly below its opening level at 44,011.22bps.
Market technicals were weak and mixed, with lower volume of trade than the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 50% buy position and 50% sell volume. The total transaction volume index stood at 0.58 points, just as impetus behind the day’s performance was weak as Money Flow Index is looking up at 49.73pts, from the previous day’s 45.69pts, indicating that funds entered the market, despite closing lower.
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Index and Market Caps
The composite NGX All-Share Index, at the close of the day trading slide by 35.72bps, closing at 44,011.22 basis points, after opening at 44,050.44bps, representing a 0.08% drop, just as market capitalization fell by N19.48bn, closing at N23.97tr from the previous day’s N23.99tr, which also represented a 0.08% value loss.
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Thursday’s downturn was driven by profit taking in Guinness, GTCO, Zenith Bank, Accesscorp, UACN, Vitafoam, Oando, Ucap and UPDC, among others, which impacted mildly on Year-To-Date gain, increasing to 3.03%. Market capitalization gain YTD stood at N1.18 trillion, representing a 8.30% rise over the opening level for the year.
Bearish Sector Indices
Sectorial performance indexes were down, save for the NGX Insurance that closed higher by 0.17%, while the NGX Banking led the decliners after losing 0.96% followed by Energy. Consumer and Industrial goods with 0.83%. 0.49% and 0.09% respectively.
Market breadth was negative, as losers outnumbered gainers in the ratio of 21:13; just as transactions in volume and value were down as investors exchanged just 97.70m shares worth N847.88m. Volume was driven by trades in Transcorp, Accesscorp, Sterling Bank, GTCO and Nahco.
Unilever and Stanbic IBTC were the best performing stocks after gaining 10% and 9.10%, closing at N11.00 and N30.00per share respectively on market forces and impressive earnings respectively. On the flip side, Guinness and SCOA lost 10% and 9.80%, closing at N60.50 and N1.29per share, purely on profit taking and selloffs.
We expect mixed sentiments to continue on cautious trading as player’s digest October CPI, ahead of MPC meeting and portfolio repositioning. Amidst bargain hunting and election uncertainty, as investors are taking advantage of the low prices ahead of year end seasonality.
Invest 2023 Traders & Investors’ Summit
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Tel: 08028164085, 08179547605