Mixed Trend Ahead On More Q3 Earnings Reports Inflow, Year-end Repositioning

Market Update for October 20

It was yet another volatile and mixed session on the Nigerian Exchange at the midweek after the holiday as the composite NCX All-Share index closed higher on above daily average traded volume and positive breadth to short live the previous day’s loss.

The seeming seesaw movement on Monday and at the midweek result from bargain hunters taking advantage of the pullback to position in the midst of profit-taking, ahead of more quarterly earnings reports as the Q3 season kicked off. UPDC made available its nine-month scorecard during the trading session, showing that although the numbers are still red, there was an over 50% drop in loss after tax when compared to the previous nine-month period.

The buying interest in the newly quoted NGX Group continued, as FBNH rebounded after profit booking to close higher on positive sentiment and other blue-chip stocks like MTNN, Lafarge Africa were on demand during the session.

Technically, the market readjusted its positive momentum while following the midweek rebound, a new uptrend will be confirmed when the NGX index action breaks out the resistance levels of 41,510.19bps and 41,584.85bps. This is possible this week as more quarterly earnings hit the market. However, the state of these expected earnings reports and the level of liquidity in the equity space will determine the possibility of another rally for the rest of the month and beyond. All eyes are on the FGN Bond Auction rates that will kick off any time from now, even as transactions in the last two and three-year savings bonds with rates of 6.9% and 7.9% respectively are being concluded. The money flow index fell slightly to 91.14points to reflect the profit-taking activities of investors.

Investors should hold onto their high value and growth stock positions, even as the direction in the fixed income market by way of yields and rates is still not clear, which is not unexpected since funds flow to where there are higher returns.

Midweek’s trading started on the downside but rebounded to oscillate throughout the session on position-taking and selloffs, a situation that pushed the NGX index to an intraday high of 41,278.17 basis points, from its lows of 41,083.89bps, after which it finally closed above the opening points at 41,249.71bps.

Market technicals were strong and mixed as volume traded was higher than the previous day’s in the midst of breadth that favoured the bulls, and positive sentiment as revealed by Investdata’s Sentiment Report showing 85% ‘buy’ position and 15% sell volume. Total transaction volume index stood at 1.40 points, just as the energy behind the day’s performance was strong, but slowed down as Money Flow Index dropped to 83.09 points, from the previous day’s 91.31 points, indicating that funds flowed out, despite the upmarket.

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Index and Market Caps

At the end of Wednesday’s trading, the NGXASI gained 105.04 basis points and closed at 41,249.71bps after opening at 41,144.67bps, representing a 0.26% up, just as market capitalization rose by N54.81bn, closing at N21.53tr, from the opening value of N21.47tr, also representing 0.26% value gain.

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The session recorded an upturn as a result of buying interests in NGX Group, FBNH, MTNN, Zenith Bank, UBA, GSK, NPF Microfinance, and Lafarge Africa, among others, which impacted mildly on Year-To-Date gain that increased to 2.43%. Market capitalization stood at N469.68bn YTD, representing a 2.23% growth from the year’s opening value.

Mixed Sector Indices

Performance indexes across sectors were mixed, as the NGX Insurance and Industrial Goods closed 0.58% and 0.04% higher respectively, while the NGX Oil/Gas led the decliners after losing 0.39%, followed by Consumer Goods and Banking with 0.24% and 0.20% respectively.

Market breadth was positive, as advancers outnumbered decliners in the ratio of 21:18, while activities in volume and value terms were up, after stockbrokers crossed 499.51m shares worth N5.08bn, compared to the previous day’s 338.15m units valued at N4.06bn. Volume was driven by trades in FBNH, Etranzact, Access Bank, Transcorp, and GTCO.

The best-performing stocks during the session were NGX Group and GSK which gained 10% and 6.87% to close at N21.45 and N7.00 per share respectively on market sentiments and Q3 earnings expectation. On the flip side, Prestige Assurance and Academy Press lost 8.51% and 8.33% respectively, closing at N0.43 and N0.33per share purely on profit-taking and selloffs.

Market Outlook

We expect a mixed trend as market players reposition for Q3 earnings season and year-end, also react to these numbers, as more quarterly corporate earnings are expected to hit the market. Just as candlestick formation and volume traded at the end of midweek trading revealed that trend was intact as institutional players are not selling. It is equally noteworthy that this pullback is for accumulating more positions ahead of the earnings reporting season. Also, many stocks are trading within their buy ranges, a situation expected to attract more funds into the equity space, given the Dividend Yield capable of serving as a hedge against inflation.

Also, institutional investors and others continue to digest recently release economic data, the outcome of the Treasury bill auction was 91 and 182 days tenor rate remained unchanged and 364 days slightly down by 25 points to 7.25% for a whole one year ahead of earnings season portfolios repositioning. Also, investors are still observing the interplay of forces in the FX market as the CBN’s new digital currency platform. The day’s low volume suggests that institutional investors are not making a sell move yet in the market, as they look at the economic data and policy direction of the economic managers. It is noteworthy that oil price rebounded in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner for companies like Total, Seplat, Okomu Oil, Presco, Lafarge Africa, and others.

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Ambrose Omordion

CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605