Mixed Sentiments Ahead On Reactions To Earnings, October PMI Data, Election Worries

Market Update for November 1

Profit taking and selloffs on the Nigerian Exchange continued on the first trading day of November in the midst of a better than expected Q3 corporate earnings report is a clear reflection of the uncertainties and rising sovereign risk as shown by the low liquidity and confidence as the 2023 elections draw closer in the face of continued government borrowing, insecurity and slowing macroeconomic reports.

The fact that November has started on a negative sentiment, after five consecutive months of bearish transition due to the depreciation in the prices of high priced stocks which has created huge buying opportunities awaiting the inflow of funds after market players digested these impressive earnings. Trade metrics revealed a very high traded volume and negative market breadth as the composite index closed lower.

Historically, Investdata research shows that the first trading session in the month of November has always been mixed, closing down six times, according to an analysis of 12-year data.

It is also quite interesting to note that putting together all the six months of the year, the best six months’ window of the year on the nation’s stock market performance is between November and April as revealed by data.

The stock market, being a leading economic indicator, is already pointing to where the economy is heading, considering the robust corporate earnings of listed companies representing different sectors of the economy that were just made available to the exchange to guide investors decision and investment plan.

The October Purchasing Managers’ Index showed a marginal contraction, amidst other economic data that continue to confirm the ongoing recovery whether weak or slow, according to a report by Stanbic IBTC research that show manufacturing activities slide to 53.6 points from 53.7 points in September. On the strength of this slow recovery, the World Bank had revised Nigeria’s GDP growth projection down from 3.4% and 3.2%. This was on the strength of increasing economic headwinds globally and domestically, despite the seemingly positive outlook on oil prices and fear of recession on rising rates hike in inflationary environment.

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 $95.29, in the midst of Saudi intelligence warming of an imminent Iranian attack.  Also, the continued 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.

Tuesday’s trading opened slightly in the upside but pulled back in the midday to afternoon trading session on highly priced equities and other blue chip companies, a situation that pushed the NGX’s index to an intraday low of 43, 657.95bps from its highs of 43,968.82bps before closing below its opening level at 43,745.73bps.

Market technicals were weak and mixed, with higher volume of trade than the previous session in the midst of negative breadth and selling sentiment as revealed by Investdata’s Sentiments Report showing 28% buy position and 72% sell volume. The total transaction volume index stood at 1.15points, just as energy behind the day’s performance was weak as Money Flow Index is looking down at 26.27pts, from the previous day’s 34.21pts, indicating that funds left the market.

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Index and Market Caps

At the end of Tuesday’s trading, the composite NGX All-Share Index shed 93.35bps, closing at 43,745.73 basis points, after opening at 43,839.08bps, representing a 0.21% decline, just as market capitalization fell by N49.46bn closing at N23.82tr, from the previous day’s N23.88tr, which also represented a 0.21% lost in value.

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Meanwhile, Tuesday’s downturn was driven by selloffs and profit taking in the shares of Seplat, Julius Berger, UACN, University Press, BUA Foods, Stanbic IBTC, Sterling Bank and NPF Microfinance, among others, which impacted negative on Year-To-Date gain, reducing it to 2.41%. Market capitalization gain YTD decrease to N784 bn, representing a 7.68% rise over the opening level for the year.

Mixed Sector Indices

Sectorial performance indexes were mixed, as the NGX Energy and consumer goods closed lower by 4.31% and 1.58% respectively, while NGX Industrial goods led the advancers after gaining 1.33%, followed by Insurance and Banking with 0.43% and 0.07% respectively.

Market breadth was negative with losers and gainers in the ratio of 19:14; just as activities s in volume and value were mixed, as stockbrokers transacted 160.01million shares worth N3,33bn. Volume was driven by trades in Accesscorp, Sterling Bank, Transcorp, UBA and Zenith Bank.

Nahco and Regency Insurance were the best-performing stocks, gaining 9.35% and 4.35% each, closing at N6.20 and N0.24 per share respectively on market sentiment and forces. On the flip side, Julius Berger and Seplat lost 9.46% and 8.33%, closing at N23.45 and N1,100 per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiments to continue on reactions to corporate earnings and October PMI data in the midst of bargain hunting and election uncertainty, as investors are taking advantage of the low prices to reposition ahead Q3 GDP report.

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Tel: 08028164085, 08179547605