Mixed Sentiments May Linger On NGX, Amidst Surging Inflation, Ahead Q3 Macroeconomic Data
Market Update For November 15
Tuesday’s trading activities on the Nigerian Exchange was mixed, with the benchmark NGX All-Share index closing flat despite a positive market breadth and low traded volume that indicates the lack of supply, which signals the possibility of 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 as released Tuesday by the National Bureau of Statistics (NBS).
According to the report, Consumer Price Index (CPI), which measures the movement in pirces of goods and services across the country, hit a new 17-year high at 21.09% year-on-year, from 20.77% in September. This headline inflation growth was attributed to disruptions in supply of food products, increase in cost of importation as a result of foreign exchange market hiccups and the subsequent Naira devaluation. These were made worse by the general increase in the cost of production, due to high energy prices and insecurity across the country that has prevented farmers from accessing their farms for so long.
It is however noteworthy that the acceleration rate of the CPI has slowed down, when considered on a month-on-month basis, declining to 1.24% from 1.36% in September, a situation that has been sustained in the last three months due, possibly to the change in the food index and the present harvesting season.
In the same vein, due to the festive period around the corner, inflation figure for the month of November and December are expected to remain in the northward direction as a result of increasing demand in the face of continued depreciation of the Naira, which continues to heighten the cost of imported goods, and the increasing cost of production.
As market player digest the inflation report in expectation of Q3 GDP figure, they will also keep their gaze on outcome of the last Monetary Policy Committee meeting of the Central Bank of Nigeria 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.
Despite the flat market and selloffs in some major sectors, 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 holding cash to confirm market direction, especially given the planned financial market reset in 2023, and beyond expected to create wealth for discerning investors.
Technically, at the end of Tuesday’s trading, some indicators revealed a new uptrend that needs confirmation as the market opens for the midweek’s session, 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.
Investing in the stock market requires deliberate efforts, if you must be on the winning side of the market at the right time, because it pays to take the opposite side of trade when bull or bear sentiments among market players hits an extreme level. This is called contrarian investing, which has been behind the famous quote by Warren Buffett: “be fearful when others are greedy and be greedy when others are fearful.” It is important for investors to know what to do per time, relative to the state of the market and happenings in the area of market fundamentals and economy at large.
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 $93.26, in the midst of OPEC cutting demand on 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, Tuesday’s trading opened in the green, and it was sustained till early afternoon before pulling back on selloffs in industrial goods, despite the buying interests in banking stocks and others, a situation that pushed the NGX’s index to an intraday low of 43,788.18bps from its highs of 43,857.81bps before closing below its opening level at 43,808.25bps.
Market technicals were weak and mixed, with lower volume of trade than the previous session in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 29% buy position and 71% sell volume. The total transaction volume index stood at 0.61 points, just as energy behind the day’s performance was weak as Money Flow Index is looking down at 39.95pts, from the previous day’s 43.56pts, indicating that funds left the market.
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Index and Market Caps
At the end of Tuesday’s session, the NGX All-Share Index, shed 9.87bps, closing at 43,808.25 basis points, after opening at 43,818.12bps, representing a 0.02% drop, just as market capitalization fell by N5.38bn, closing at N23.86tr from the previous day’s N23.87tr, which also represented a 0.02% value loss.
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Tuesday’s downturn was driven by profit taking and selloffs in Lafarge Africa, FCMB, Cutix, Accesscorp , Unity Bank, Aiico and Royal Exchnage, among others, which impacted mildly on Year-To-Date gain, increasing to 2.56%. Market capitalization gain YTD stood at N947bn, representing a 7.60% rise over the opening level for the year.
Mixed Sector Indices
Sectorial performance indexes were mixed, with the NGX Insurance and Industrial goods closing 1.10% and 0.65% lower respectively, while the NGX Consumer goods led the advancers after gaining 0.38% followed by Energy and Banking with 0.30% and 0.24% respectively.
Market breadth was positive, as gainers outnumbered losers in the ratio of 15:13; just as activities in volume and value were down as investors exchanged just 103.47m shares worth N1.19bn. Volume was driven by trades in FBNH, Transcorp, Fidelity Bank, Accesscorp and GTCO.
Computer Warehouse Group and Learn Africa were the best performing stocks after gaining 10% each, closing at N0.88 and N1.65per share respectively on market forces. On the flip side, Lafarge Africa and Royal Exchange lost 9.66% and 9.41%, closing at N20.10 and N0.77per share, purely on profit taking and selloffs.
We expect mixed sentiments to continue as investors digest October CPI in the midst of portfolio repositioning and bargain hunting in expectation of more macroeconomic data and election uncertainty, as investors are taking advantage of the low prices to reposition ahead Q3 GDP report and year end seasonality.
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