Mixed Sentiments, As Bargain hunters Digest Q3 Earnings Amidst Sector Rotation

Market Update for October 26

Stock prices on the Nigerian Exchange closed lower on Thursday, extending the mixed sentiment and bearish run for the second consecutive session amidst fixed income market yields moving higher at the end of the week TB primary market auction. Rates inched up across all tenor to 5.99%, 9% and 13% respectively for 91, 182 and 364-day instruments in the face of impressive corporate earnings from the financial services providers and others that hit the market so far this week. Thursday’s pullback confirmed the top reversal candlestick pattern formation at the end of midweek trading.
With the impressive numbers from MRS Oil, Dangote Cement, Berger Paints, Transcorp Hotel, Japual Gold, Transcorp and others, hitting the market just as the not to impressive numbers from Cadbury, Total, Morison Industries and others. Berger Paints and Presco announced interim dividend of 20 kobo and N2.00 respectively, even as all eyes are on more earnings reports to give insight into dividend possibilities at the end of the year. This will support price at current levels and beyond. So, market players will pay attention to these earnings and dividend yields to hedge against inflation, despite the relatively high yields in money market now.
Selloffs and profit taking weighed on the key performance NGX All-Share index that closed lower on a less average traded volume and negative market breadth. The selling sentiment witnessed at the end of trading. Already, the candlestick formation again has indicated reversal but needs to be confirm as the market opens on today. The benchmark index still trades above the 67,000 points psychological line, while flat on T line to remain within the consolidation range with less volume and high volatility associated with earnings reporting seasons and last quarter seasonality.
Market correction or pullbacks at this level has created buy opportunities for smart money which are gradually repositioning their portfolios amid rising inflation and high Monetary Policy Rate. Already, the outlook for fixed income market yields remains mixed with the latest higher rates in TB primary market auctions, while bond market remained bearish in the face of rising inflation. On the strength of higher treasury yields, funds flowing to the equity space has slowdown as revealed by the money flow index, market players should continue to take advantage of the ongoing oscillation and pullbacks in some major sectors of the market to reposition their portfolios as more quarterly scorecards are expected.
The ongoing geopolitical tension will continue to drive global and domestic market volatility, so investors and traders anywhere in the world should factor in this uncertainty to their trading and investment plans always. The NGX index’s action still trades above the T-line and 50 DMA, as more company’s board meeting dates draw closer for approval Q3 numbers. The index’s action stayed within the consolidation range as it pulled back. Owing to the cautious environment pervading the nation’s equity market, it is important that you trade and invest wisely ahead of events and factors that will shape the market in this last quarter of this year. Despite the mixed sentiment witnessed so far, the market’s big uptrend remains intact, in the midst of a material shift in the index and the ongoing volatility.
To navigate the rest of the quarter and year profitably using fundamental and technical analysis, join investdata’s 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 selloffs. Despite the mixed volume pattern witnessed in recent days, it is time to shop for undervalued stocks, sector rotation, go for defensive stocks at the next insider playing opportunity.
Oil price oscillation continued, as it trades at $89.87 per barrel in the midst of global economic concerns and hopes of containment in the middle east. Even when there is tightening market fundamentals. However, cooking Inflation outlook remain mixed on the back of geopolitical tensions across the globe today, at a time the Russia-Ukraine war entered its second year, and remains a major concern, aside the prevailing high interest rate regime, despite the recent pause. The supply tightened due to the Russia-Ukraine will drive up and down movement in oil price, which also drive market volatility across the globe.
Thursday’s trading opened slightly in the green, before pulling back to oscillate throughout the session on buying interest and selloffs in banking, insurance stocks and others. This situation pushed the Index to an intraday low of 67,064.42bps from its highs of 67,211.19ps, before closing below its opening figure at 67,084.95bps.
Trading metrics were negative and mixed with a lower volume traded, when compared to the previous session, in the midst of breadth favoring the bears on a selling sentiments as revealed by Investdata’s Sentiments Report showing 14% buy position and 86% sell volume. The total transaction volume index stood at 0.62 points, just as the impetus behind the day’s performance was relative strong, with Money Flow Index reading 68.98pts, from the previous day’s 75.96pts, indicating that funds left the market.
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Index and Market Caps
The benchmark NGX All-Share Index, at the end of the day trading shed 121.21bps, closing at 67,084.95bps, from the 67,206.16bps opening level, representing a 0.18% drop. Market capitalization also fell slightly by N66.59bn, closing at N36.87tr, from the previous day’s N36.92tr, which also represented a 0.18% value loss.
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Meanwhile, Thursday’s downturn was driven by profit taking and selloffs in shares of MTNN, Stanbic IBTC , ETI, GTCO, UBA, Zenith Bank, Etranzact and Aiico, among others, impacting mildly on Year-To-Date gain which dropped to 30.89%, while Market Capitalization YTD gain stood at N8.26tr, representing a 32.48% rise above its opening level for the year.

Bearish Sector Indices
Sectoral performance indexes were down, save NGX Consumer goods that closed 0.21% higher, while NGX Insurance led the decliners after shedding 1.82%, followed by Banking with 0.33%. Just as NGX Energy and Industrial goods finished flat.
Market breadth turned negative as losers outnumbered gainers in the ratio of 29:11, while activities in volume and value terms were mixed, after players exchanged 267.65m shares worth N5.11bn, driven by trades in Fidelity Bank, Chams, Accesscorp, UBA, and Japaul Gold.
UACN and Oando were the best performing stocks, gaining 6.09% and 4.07% respectively, closing at N12.20 and N8.95per share respectively, on market forces and Q3 expectation. On the flip side, NSLTECH and CWG lost 10% and 9.94%, closing at N0.27 and N7.70per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect mixed sentiments as investors and bargain hunters continue to digest the numbers released so far ahead of more Q3 earnings reports in the face of sector rotation. Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.
However, pullbacks are creating ‘buy’ opportunities amidst the economic reforms of the government, just as more policy pronouncements and economic managers hit the ground running, a situation expected to offer investment direction eventually.
We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price rally to take profit, while also looking at the trends and events across the globe and domestically.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605