Market Update for October 12
Profit taking by investors on the Nigerian Exchange at midweek halted the bull transition on a less than average traded volume, as the composite NGX All-Share index closed lower on selling sentiments in major sectors of the market as investors eagerly await the release of the consumer price index for September and quarterly earnings reports with mixed vibes around the market. Investors also continued to take advantage of strong and weak sectors to reposition their portfolios ahead of the real numbers from the quoted companies in this earnings season.
With the changing business and economic environment across the globe and locally, it is time for investors and traders to understand the big picture and dive deep into all the 11 sectors of the market to rank performance and sentiment 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.
All eyes are on economic and corporate numbers, following which discerning investors should take advantage of the losses suffered by blue-chip companies and other valued stocks to accumulate position, as these numbers starts to hit the market any moment from next week, especially from the early filers like Infinity Trust Mortgage, UCap, Africa Prudential and others.
It is expected that liquidity level may improve as the 2023 electioneering activities revs into top gear with the kickoff of party campaigns, considering the state of the nation’s economy and insecurity. Also, more listed companies have continued to notify the exchange of their closed period and board meetings dates to consider and approve the financials for the quarter-ended September 30, 2022.
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 all eyes on the US September Consumer price index report today. The UK experience, coming after the World Bank and IMF’s continued warning that the central banks should rethink and avoid pushing the global economy into yet another recession. We see that is already happening in UK, China, Japan and others. It is time for the Nigerian central bank and its Monetary Policy Committee to have a rethink before things go further out of hand.
The low valuation of the NGX, high earnings and dividend yields on improved earnings released so far in the year, coupled with the expectation of the third quarter corporate earnings to shape the market’s direction in the face of inflation hitting a 17-year high at above 20%. This has caused many players to stay on the fence, waiting to confirm direction before jumping in, as outlook for the economy and the financial market remains unpredictable.
Despite the lingering high interest rates atmosphere, rising inflation and slowing industrial output as a result of policy changes and uncertainty around the globe, there are sectors, industries and individual stocks that are still seeing positive activities from traders and investors. There are equity players should pay attention to, as the correction in the NGX index action create buying opportunities in some sectors and individual defensive stocks with high dividend high yield and positive earnings growth.
Market internals are revealing the hidden forces that work for both short and long-term traders to get into the best position and allow you to stay in them for maximum profit, despite the market rebounding, or weakening further. The market’s internals that measure the forces behind the advancers and associated volume of the uptick or downtick. These two ratios tell you everything you need to know to predict future price movements. So, the volume pattern and index structure in recent sessions show position taking, while funds enter some stocks as revealed by money flow index which need to be confirmed, especially as negative sentiment supported the previous session candlestick formation.
To navigate the rest of the month 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 prices sustained its oscillation trade at $92.92 on fear of recession hitting demand, despite the recent OPEC production cut 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 started slightly in the downside and it was sustained throughout the session, despite oscillating on positioning and profit-taking hit the banking stocks and others. This pushed the NGX’s index to an intraday low of 47,529.93bps from its highs of 47,572.78bps before closing marginally below its opening level at 47,531.84bps.
Market technicals were weak and mixed, with higher volume of trade than the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 4% buy position and 96% sell volume. The total transaction volume index stood at 0.92points, just as momentum behind the day’s performance was weak as Money Flow Index is looking up at 31.77pts, from the previous day’s 24.97pts, indicating that funds entered the market, despite sliding down.
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Index and Market Caps
At the end of Wednesday’s trading the NGX All-Share Index fell by 34.08bps, closing at 47,531.84bps, after opening at 47,565.92bps, representing a 0.07% drop, just as market capitalization fell by N18.57bn closing at N25.89tr, from the previous day’s N25.91tr, which also represented a 0.07% value loss.
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The downturn was driven by selloffs and profit taking in FBNH, GTCO, Honeywell, Accesscorp, UBA, Fidelity Bank, GSPEC Plc, NGXGroup and Mansard, among others which impacted mildly on Year-To-Date gain, reducing it to 11.27%. Market capitalization gain YTD increase to N2.04tr, representing a 18.08% rise over the opening level for the year.
Bearish Sector Indices
Sectorial performance indexes were down, except for NGX Energy that closed higher by 0.35%, while NGX Insurance led decliners after losing 0.53%, followed by Banking and Consumer goods with 0.31% and 00.05% respectively. Just as NGX Industrial goods closed flat.
Market breadth remained negative, as losers outpaced gainers in the ratio of 18:9; just as activities in volume and value were up, as investors exchanged 155.18m shares worth N3.66bn. Volume was driven by trades in Mutual Benefit Assurance, GTCO, Zenith Bank, Courtville Business Solution and Dangote Cement.
Redstar Express and May/Baker were the best-performing stocks, gaining 8.49% and 3.70% respectively, closing at N2.30 and N4.20 per share respectively on market sentiment and forces. On the flip side, GSPEC Plc and Honeywell Flour lost 9.82% and 9.77%, closing at N2.48 and N1.94 per share, purely on selloffs and profit taking.
We expect mixed sentiments to continue on bargain hunters taking advantage of the low prices to reposition ahead 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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