Mixed Sentiments On Bargain Hunting, Portfolio Repositioning, Ahead Of Q3 Earnings

Market Update for October 23

Trading on the Nigerian Exchange (NGX) opened for the week was mixed, as the benchmark All-Share index closed marginally lower, extending the bear-run for the third successive sessions on a less than average traded volume and positive market breadth. Buying interests in financial services stocks continued in expectation of more corporate earnings hitting the market. Also, Q3 numbers from Royal Exchange Insurance and Unilever Nigeria had given market players an insight what should be expected from insurance companies and others.
Despite this, the seeming oscillation in volume pattern and the pullbacks witnessed so far in the market, smart money are gradually repositioning their portfolios amid rising inflation and high MPR. Also, the outlook for fixed income market yields remain mixed in the face of ongoing decline recorded in the last two TB primary market auction and bearishness of the bond market.
In this hyper-inflationary environment, discerning investors should start looking the way of Julius Berger, UPDC, UDPCREIT and other companies that the demand is inelastic in nature, or price. When we said it is good for economic managers to communicate their plans or policies to allow the people know where they are going. The recent moves by the CBN, NNPC and ministry of finance to source or borrow FX amounting to $10bn to settle the backlog and supply in the exchange market to reduce this high volatility being witnessed in the market. this is a welcome development.
On the strength of improving transaction volume, mixed momentum and flow of funds into equity space as revealed by the money flow index, investors and traders should continue to take advantage of the ongoing oscillation and pullbacks in some major sectors of the market to reposition their portfolios as more scorecards are expected in the market. Also, the market awaits positive catalysts in the form of policy statements from economic managers to boost confidence and perception, even with the ongoing decline in the fixed income market rates and yields in the midst rising inflation, which has gradually triggered flow of funds into the equity space, as revealed by money flow index, ahead of more Q3 financials.  
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 retraced up. 
Amid raging concerns over macroeconomic headwinds in the country today, Q3 earnings expectation, there are other concerns such as the mixed outlook in fixed income yields as the bond market remains bearish, with the Naira crossing the N1,000/US Dollar threshold, and rising inflation, among others. 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 inched up to trade at $90.54 per barrel in the midst of middle east conflict, fear of demand and supply shortage. Even when some nations are already looking the way of Venezuela which is also an OPEC member. However, the soaring Inflation which we believe would be sustained on the back of the due geopolitical tensions, at a time the Russia-Ukraine war entered its second year, and remains a major concern, aside the prevailing high interest rate regime. Also, supply tightened due to the Russia-Ukraine This up and down movement in oil price, has continued to drive volatility across markets.
Meanwhile, Monday’s trading started slightly in the downside and was sustained for the rest of the session, despite oscillating on profit taking and buying interest in banking, insurance stocks and others. This situation pushed the Index to an intraday low of 66,860.14bps from its highs of 66,924.82ps, before closing marginally below its opening figure at 66,876.92bps.
Market technicals were positive and mixed with a higher volume traded, when compared to the previous session, in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 26% buy position and 74% sell volume. The total transaction volume index stood at 0.69 points, just as the impetus behind the day’s performance was relative strong, with Money Flow Index reading 63.65pts, from the previous day’s 63.03pts, indicating that funds entered the market.  
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Index and Market Caps
At the end of Monday’s trading, the NGXASI lost 38.49bps, closing at 66,876.92bps, from its 66,915.41bps opening level, representing a 0.06% drop. Market capitalization also fell by N21.15bn, closing at N36.74tr, from the previous day’s N36.76tr, which also represented a 0.06% value loss.   

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Monday’s downturn was driven by selloffs in the shares of the newly listed VFD Group, Dangote Sugar, Oando, GTCO, Fidelity Bank, University Press and CHI Plc, among others. This impacted mildly on Year-To-Date gain which dropped to 30.49%, while Market Capitalization YTD gain stood at N8.09tr, representing a 32.12% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Consumer Goods that closed 0.30% lower, while the NGX Insurance led the advancers after gaining 0.68%, followed by Banking with 0.44%. Just as NGX Industrial goods and Energy finished flat.
Market breadth was positive as gainers outnumbered losers in the ratio of 23:21, while activities in volume and value terms were mixed, after investors exchanged 314.60m shares worth N4.40bn, driven by trades in UBA, Accesscorp, FCMB, GYCO and Transcorp.
Thomas Watt and Academy Press were the best performing stocks, gaining 9.9% and 9.7% respectively, closing at N3.99 and N14.80per share respectively, on market forces and sentiments. On the flip side, VFD Group and Mc Nichols lost 10% and 9.7% respectively, closing at N232.40 and N0.56per share, purely on the back of selloffs.

Market Outlook
We expect mixed sentiments to continue on bargain hunting and portfolio repositioning 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