Market Update for October 18
The negative outing on the Nigerian Exchange continued Tuesday with selloff in Airtel Africa persisting and further dragging the market down in the midst of the earnings reporting season and interpretation of the latest consumer price index report for September. Also, market players are searching for value in the face of the increasing economic headwinds to hedge against stagflation and bear market.
There were also mixed market metrics amid momentum slowdown in the face of positive market breadth and increased traded volume on a seeming reduction in losing forces of NGX index action as telecommunication giants extend its free fall on portfolio repositioning. This extended the decline phase of the market, as it broke down the psychological line of 46,000 on sector rotation that had continued in hope of more corporate earnings.
The NGX All-Share index, once again, closed sharply lower on a very high traded volume, despite the mixed sentiment and demand for stocks in some of the major sectors of the market. Here, understanding the big picture and the outlook of the expected financial reports of the companies in this changing business and economic environment across the globe and locally will help market players reposition their portfolios on the strength of the 11 sectors of the market performance and sentiment rank 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.
Despite the seeming high volume of trade due to transactions in Computer Warehouse Group, the prevailing low transactions in the market reflects the low liquidity and impact of high yield in the fixed income market, in the last TB primary auction 364 days rate hit 13%. But with the expected liquidity level to improve as 2023 electioneering activities move into top gear with the kickoff of party campaigns, considering the state of the nation’s economy and lingering insecurity. Also, more board meetings dates to consider and approve the financials for the quarter-ended September 30, 2022 are being scheduled for the coming days and weeks.
In the current market situation, traders or investors need to up their game, by understanding 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 investors reacting to US September Consumer price index report released yesterday. 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.
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 still seeing positive activities from traders and investors. There are equity players should pay attention to, as the correction in the NGX index action creates buying opportunities in some sectors and individual defensive stocks with high dividend high yield and positive earnings growth.
At this point in the market, trade what you are seeing by staying in the right side of the market and looking at price action, momentum, market timing and forecast to boost your trading results in any market situation. 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 mixed 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 to trade at $90.15, in the midst of renewed confidence on UK fiscal update and new direction of the government to foster country financial stability. Despite fear of global recession 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, Tuesday’s trading opened sharply in the downside and was sustained for the rest of the session, despite oscillating on position taking in banking stocks and other blue chip companies. This pushed the NGX’s index to an intraday low of 44,937.90bps from its highs of 46,365.95bps before closing below its opening level at 45,366.32bps.
Market technicals were strong and mixed, with higher volume of trade than the previous session in the midst of breadth favouring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 30% buy position and 70% sell volume. The total transaction volume index stood at 2.49points, just as impetus behind the day’s performance was weak as Money Flow Index is looking down at 28.49pts, from the previous day’s 37.46pts, indicating that funds left the market.
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Index and Market Caps
The benchmark NGXASI, at the end of Tuesday trading fell by 999.63bps, closing at 45,366.32bps, after opening at 46,365.95bps, representing a 2.16% decline, just as market capitalization fell by N544.47bn closing at N24.71tr, from the previous day’s N25.25tr, which also represented a 2.16% value loss.
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Tuesday’s downturn was driven by selloffs and profit taking in Airtel, NB, Oando, Lafarge, Champion Breweries, NGXGroup, FBNH, Stanbic IBTC, Fidson and CWG, among others which impacted negatively on Year-To-Date gain, reducing it to 6.20%. Market capitalization gain YTD decrease to N1.03tr, representing a 13.49% rise over the opening level for the year.
Mixed Sector Indices
Sectorial performance indexes were mixed, as NGX Consumer goods and Energy closed lower by 1.14% and 0.28% respectively, while NGX Industrial goods led the advancers after gaining 1.38%, followed by Banking and Insurance with 0.95% and 0.47% respectively.
Market breadth was positive, as advancers outpaced decliners in the ratio of 18:15; just as activities in volume and value were mixed, as players exchanged 420.28m shares worth N3.62bn. Volume was driven by trades in CWG, GTCO, Zenith Bank, Fidelity Bank and Accesscorp.
United Capital and Regency Insurance were the best-performing stocks, gaining 9.69% and 8.33% respectively, closing at N12.45 and N0.27 per share respectively on positive earnings and market forces. On the flip side, Airtel Africa and NB lost 10% and 9.80%, closing at N1,458 and N41.90 per share, purely on selloffs.
Market Outlook
We expect mixed sentiments to continue on reaction to earnings release so far and bargain hunters are taking advantage of the low prices to reposition ahead of more 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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Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
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