Mixed Sentiments Still Amid Profit Taking, Portfolio Rebalancing On Q3 Earnings

Market Update for November 2

Selling pressure and profit taking resurfaced on the Nigerian Exchange Thursday, halting four consecutive sessions of bull transition on a very high traded volume amid a negative market breadth as mentioned in our analysis in the previous day. Market players continue to digest the better-than-expected Q3 corporate earnings reports and reposition their portfolios on the strength of the numbers and growth prospects. The benchmark NGX All-Share index pulled back after touching a new all-time high of 70,584.70 basis points, testing the trend line on high volatility.
The pullback reflects profit booking after the market broke various psychological lines and resistance levels in the face continued portfolio rebalancing and sector rotation, despite the unabating macroeconomic headwinds and others. The reversed bullish momentum witnessed on Thursday is revealed by the candlestick formation. So, continuation or reversal needs to be confirmed as the market opens Friday morning. The benchmark index is trading slightly above the 70,000 points psychological line and T line to enter distribution phase on a high volume and volatility that associates with earnings reporting seasons and last quarter seasonality.
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Oil price oscillation continued, as it rebounded to trade at $87.11 per barrel in the midst of Fed leaving rates unchanged and cautious trading on middle east conflict, coupled with supply cuts. 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 rates pause by some central banks. 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, Thursday’s trading started slightly in the green, but witnessed a pullback that was sustained throughout the session on selloffs and profit taking in high, medium and low priced stocks. This situation pushed the Index to an intraday low of 70,005.40bps from its highs of 70,584.70ps, before closing below its opening figure at 70,042.28bps.
Market technicals were negative and strong 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 6% buy position and 94% sell volume. The total transaction volume index stood at 1.29 points, just as the impetus behind the day’s performance was strong, with Money Flow Index reading 74.24pts, from the previous day’s 72.74pts, indicating that funds entered the market, despite closing lower.
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Index and Market Caps
The NGX All-Share Index at the close of Thursday shed 539.48bps, closing at 70,042.28bps, from the 70,581.76bps opening level, representing a 0.76% decline. Market capitalization also fell by N296.42bn, closing at N38.48tr, from the previous day’s N38.78tr, which also represented a 0.76% deprecation in value.

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Thursday’s downturn was driven by selloffs and profit booking in shares of MTNN, BUA Cement, FBNH, UBA, Accesscorp, GTCO, Zenith Bank, Dangote Sugar and Chams, among others, impacting negatively on Year-To-Date gain which reduced to 36.67%, while Market Capitalization YTD gain stood at N10.34tr, representing a 38.15% rise above its opening level for the year.

Bearish Sector Indices
Sectoral performance indexes were down, except for NGX Insurance that closed higher by 1.56%, while NGX Banking led the decliners after losing 0.85%, followed by Industrial and Consumer goods with 0.65% and 0.19% respectively, while NGX Energy finished flat.
Market breadth turned negative as losers outnumbered gainers in the ratio of 27:26, while activities in volume and value terms were down, after players exchanged 525.46m shares worth N6.09bn, driven by trades in Japaul Gold, Fidelity Bank, UBA, FCMB and Chams.
Ometek and Academy Press were the best performing stocks, gaining 10% and 9.83% respectively, closing at N0.55 and N1.90per share respectively, on market sentiment. On the flip side, Chams and International Breweries lost 9.84% and 8.79%, closing at N2.20 and N4.15per share, purely on the back of profit booking.

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 weak manufacturing PMI for October. Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.

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CRO|Investdata Consulting Ltd
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