Mixed Sentiments Continue On Profit Taking, Portfolio Rebalancing, Sector Rotation, Yields Outlook

Market Update for November 6

Stock prices on the Nigerian Exchange extended their gains for the second successive session to start the first full trading week of November on a positive note, as reactions to the better-than-expected corporate earnings and portfolio rebalancing in the midst of improved yields in the fixed income market. There is also the expected macroeconomic reports and policy meeting coming holding later in the month to give a clear direction after September meeting was canceled.
The benchmark NGX All-Share index closed higher on an above average traded volume and slight negative market breadth in the midst of buying sentiment as institutional players continue to digest the latest corporate earnings. There is also the impact of the mixed outlook in money and bond market yields due to the rising inflation for which slowdown is not in view owing to the heightening insecurity following which many countries have issued travel advisory on where to go, or avoid in Nigeria. This is not a good news for the economy.
The positive momentum reflected on the mixed session after the market extended Friday’s gains to remain above the psychological line of 70,000 to test 70,519.31 on appreciation of highly priced stocks as sector rotation continued. The bullish sentiment witnessed on Monday was revealed by the candlestick formation. So, continuation or reversal needs to be confirmed as the market opens Tuesday morning. The index is trading above the T-Line to signal the markup phase on an above-average traded volume and volatility associated with last quarter seasonality.
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Oil price oscillation continued, as it pulls back to trade at $84.57 per barrel in the midst of push for OPEC to ban supporters of middle east conflict by Iran, this could cause global economic turmoil, despite the rate pause by central banks and cooling inflation. As geopolitical tensions across the globe continued to rise, at a time the Russia-Ukraine war entered its second year, and remains a major concern. 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.
Meanwhile, Monday’s trading opened in the upside and it was sustained for the rest of the session on positioning in high cap stocks and others, despite profit taking in some stocks. This situation pushed the Index to an intraday high of 70,519.31bps from its lows of 70,196.93ps, before closing above its opening figure at 70,479.62bps.
Market technicals were positive and mixed with a lower volume traded, when compared to the previous session, in the midst of breadth favouring the bears on a buying sentiments as revealed by Investdata’s Sentiments Report showing 88% buy position and 12% sell volume. The total transaction volume index stood at 1.03 points, just as the energy behind the day’s performance was strong, with Money Flow Index reading 71.41pts, from the previous day’s 71.23pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Monday’s trading, the composite NGX All-Share Index gained 282.69bps, closing at 70,479.62bps, from the 70,196.77bps opening level, representing a 0.40% growth. Market capitalization also rose by N155.27bn, closing at N38.71tr, from the previous day’s N38.55tr, which also represented a 0.40% value gain.
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The upturn was driven by the demand for shares of BUA Cement, Seplat Energy, FBNH, UBA, NB, GTCO, Fidelity Bank, Oando and Chams, among others, impacting positively on Year-To-Date gain which inched up to 37.52%, while Market Capitalization YTD gain stood at N10.49tr, representing a 39.24% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Insurance and Consumer goods closed lower by 2.19% and 0.18% respectively, while NGX Oil/Gas led the advancers after gaining 2.31%, followed by Industrial and Banking with 1.83% and 0.66% respectively.
Market breadth turned marginally negative as losers outnumbered gainers in the ratio of 28:27, while activities in volume and value terms were down, after players exchanged 391.01m shares worth N7.71bn, driven by trades in UBA, FBNH, Japaul Gold, Fidelity Bank and Accesscorp.
Thomas Watt and Chams were the best performing stocks, gaining 10% and 9.90% respectively, closing at N4.07and N2.22per share respectively, on market sentiment and improved Q3 numbers. On the flip side, ABC Transport and Cornerstone Insurance lost 9.30% and 9.27%, closing at N0.78 and N1.37per share, purely on the back of profit taking.

Market Outlook
We expect mixed sentiments on profit taking and portfolio rebalancing on the strength of better than expected corporate numbers released so far, in the face of sector rotation and mixed outlook in yields space. Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.

Take Action

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