Market Update for October 26

The nation’s equity market maintained a positive outing at the midweek as the composite NGX All-Share Index closed marginally higher, thereby extending its bull transition for the fifth successive session. This was despite witnessing a mixed sentiment in the midst of low traded volume and negative market breadth, as the earnings reporting season entered its peak with more impressive corporate earnings hitting the market to sustain the ongoing rebound on the strength of the buying interest in blue chips across some major sectors of the market.

The NGX in the last three trading days of the week has been recovering on the better than expected corporate numbers released so far to the market, especially from the banking, consumer goods and energy sectors.

However, it is vitally important to look at this strength within the context of other data on the charts, focusing on price actions, or structure and momentum, with the influx of companies’ quarterly earnings are expected to drive positive sentiment as portfolio repositioning continues.

Some of the earnings reports released so far seem to have disconnected from economic reality, amid increasing headwinds in the nation and the global are signaling recession, the fundamentals do not match the performance of the financial markets. It does seem that fear is outweighing the available facts, and this fear has been introduced into the market by the Central Bank of Nigeria (CBN) in the last five months with the hiking of rates that is now propelling the flow of funds around the market. The two biggest events in the market between this last quarter of 2022 and first quarter of next year are the MPC meetings in November, January and March, and of course, and outcomes of the much talked about general election.

As more corporate numbers hit the market, the question on the lips of discerning investors is whether or not these Q3 earnings could help NGX maintain this positive momentum, as reactions are likely to extend to three or four weeks amid the wave of surprises and disappointments that comes with earnings season. Over the next couple of days and weeks, most major companies will provide the market with updates on their scorecards and outlook for the rest of the year.  It gives me a chance to help empower the do it yourself traders and investors, by identifying deep value stocks owned and controlled by billionaire investors. Just by following my approach of combing fundamentals and technicals in taking investment decision.

At the current market situation, understanding the big picture and the outlook of the expected financial reports of the companies in this changing business and economic environment across the globe and locally will help market players reposition their portfolios on the strength of the 11 sectors of the market performance and sentiment rank from strongest to weakest right now. Meanwhile, bargain hunters are capitalizing on the persisting low valuation and divergence from real value in expectation of closing gap in the future dates for profit and gains.  The power of perception or sentiments cannot be overemphasized in stock trading or investing, seeing the impact of aggressive hawkish monetary policy across the globe, with investors reacting to different news and statements. So keep your eyes on the charts.

To navigate this earnings season and the rest of the quarter 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.”

The oscillation in oil price continued as it trades at $95.43, in the midst of planned Russian oil price cap between $63 and $64 per barrel.  Also, the fear of global recession and supply tighten due to Russia Ukraine war that are getting worst. Coupled with the impact of hawkish monetary policy by central banks, just as China COVID-19 lockdown come to an end. The up and down movement of oil price also continues to drive volatility in the face of rising interest rates and inflation. Despite the bailout package of the Chinese government to simulate economic activates and stable employment, as well as that of Germany aimed at managing the energy crisis.

Meanwhile, midweek’s trading opened in the green and oscillated throughout the session on buying interests in low, medium and high priced companies, a situation that pushed the NGX’s index to an intraday high of 44,887.55bps from its lows of 44,767.49bps before closing above its opening level at 44,859.78bps.

Market technicals were mixed and weak, with lower volume of trade than the previous session in the midst of negative breadth on a buying sentiment as revealed by Investdata’s Sentiments Report showing 77% buy position and 23% sell volume. The total transaction volume index stood at 0.62points, just as momentum behind the day’s performance was weak as Money Flow Index is looking up at 40.59pts, from the previous day’s 35.19pts, indicating that funds entered the market.

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Index and Market Caps

At the end of Wednesday’s trading, the key performance  NGX All-Share Index  inched up by 71.64bps, closing at 44.859.78 basis points, after opening at 44,788.14bps, representing a 0.16%up, just as market capitalization rose  by N39.02bn closing at N24.43tr, from the previous day’s N24.30tr, which also represented a 0.16% value gain.

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The midweek’s upturn was driven by accumulation in the shares of BUA Cement, Geregu Power, UBA, Fidelity Bank, Oando, Honeywell, Aiico, University Press, Multiverse and FTNCocoa, among others which impacted mildly on Year-To-Date gain, increasing it to 5.02%. Market capitalization gain YTD increase to N1.40 billons, representing a 9.60% rise over the opening level for the year.

Mixed Sector Indices

Sectorial performance indexes were mixed, as the NGX Banking and Consumer goods closed lower by 0.93% and 0.39% respectively, while NGX Industrial goods led the advancers after gaining 1.14%, followed by Insurance and Energy with 0.92% and 0.32% respectively.

Market breadth was negative with losers and gainers in the ratio of 18:12; just as transactions in volume and value were mixed, as players traded 86.06 shares worth N3.26bn. Volume was driven by trades in Geregu, Sterling Bank, Accesscorp, Zenith Bank and ETI.

Multiverse and RT Briscoe were the best-performing stocks, gaining 10% and 5.90% each, closing at N4.62 and N0.33 per share respectively on market forces. On the flip side, Cutix and Jaiz Bank lost 6.51% and 6.19%, closing at N2.01 and N0.91 per share, purely on profit taking.

Market Outlook

We expect mixed sentiments to continue on reactions to more corporate earnings that are being released in the midst of bargain hunting and election uncertainty. As investors are taking advantage of the low prices to reposition ahead of more Q3 corporate earnings.

This is just as banking stocks are gaining attention, despite profit taking that makes the sector more attractive for income investors, while portfolio rebalancing continues on bargain hunting in the midst of the worsening sovereign risks.

We note also the flow of funds into the fixed income segment on the rate hike by the CBN, as sector rotation persists. Analysts are also focused on the lookout for August CPI and flow of funds amid oil prices oscillation.

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Ambrose Omordion

CRO|Investdata Consulting Ltd

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

Tel: 08028164085, 08179547605