Mixed Trend Ahead, On profit-Taking, As Pullback Offers Positioning Prospects

Market Update for November 11

Volatility continued on the Nigerian Exchange on Thursday as indexes and stock prices dropped lower on profit-booking ahead of economic data and in the face of continued portfolio rebalancing and repositioning for year-end seasonality and dividend expectations at a time the market has entered its most profitable six-month window that occurs between November and April. 

The market extends its two sessions of losses on negative sentiments in the major sectors and blue-chip stocks with investors taking profit from the recent rally, normal and healthy trademark of any equity market across the world.

The seeming pullbacks and corrections at this stage will enable the market to gather more strength for a new rally, thereby creating more opportunities for discerning players to position in stocks with discounted values and a history of growing their dividend payout. Already, after all, the recently released Q3 earnings have laid bare the true positions of these companies and their earnings power.

The global markets recorded mixed performances in the face of inflation data released recently and other happenings in the fixed income markets after the 91 and 182-day bills rates remaining unchanged in the week’s Treasury Bills primary auction, while rates of the long tenored 364-day instruments fell further to 6.51% from 6.99%.

Technically, sellers are in control presently as the NGX index’s action pulled back for the second successive day with the market in its distribution phase at the close of Thursday’s trading, with all the momentum indicators looking down to confirm a change of trend.  The ADX is reading 64.56 and the money flow index is down at 66.17point on the daily chart, following which the possibility of rebound and bull spike for the rest of the year and early 2022 remain high, after the profit-taking.

However, the better-than-expected Q3 earnings, and interim corporate actions, as well the level of liquidity in the equity space will determine the extent of the expected market rally when it rebounds from this pullback. Already too, all eyes are on happenings as regards the global inflation rates and oil prices currently oscillating around $84 per barrel, on the impact of the drop in oil consumption by China, as OPEC holds on to supply. So far, the direction of yields in the fixed income market remains yet unclear.

Thursday’s trading started slightly on the upside, before pulling back at mid-mornings and remained so for the rest of the session on profit-taking and selloffs in blue chips. This situation pushed the NGX index to an intraday low of 43,589.26 basis points from its highs of 43,709.28bps before closing below its opening level at 43,609.06bps.

Market technicals for the session were negative and weak with a lower volume traded than the previous day’s in the midst of breadth that favours the bears and selling pressure as revealed by Investdata’s Sentiment Report showing 84% sell volume and 16% buy position. The total transaction volume index stood at 0.42 points, just as momentum behind the day’s performance remains relatively strong, Money Flow Index looked up marginally at 66.17 points, from the previous day’s 71.65 points, indicating that funds left the market.

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Index and Mkt Cap Movement

The key performance NGXASI at the end of trading, shed 98.24 basis points, closing at 43,609.06bps after opening at 43,707.30bps, representing a 0.22% decline, just as market capitalization shed N51.27bn, closing at N22.76tr, from the opening value of N22.81tr, also representing 0.22%value loss.

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The day’s downturn was a result of selloffs and profit-taking in MTNN, GTCO, UBA, NGX Group, Zenith Bank, United Capital, Access Bank, and ETI, among others, which impacted mildly on Year-To-Date gain, reducing it to 8.29%. Market capitalization stood at N1.68tr YTD, representing a 7.81% growth from the year’s opening value.

BearishSector Indices

Sectoral performance indexes were down, except for the NGX Consumer Goods which closed 0.02% higher, while the NGX Banking index led the decliners after losing 0.95%, followed by Insurance, and Industrial Goods with0.93% and 0.10% respectively, while Oil/Gas was flat.

Market breadth was negative, as losers outnumbered gainers in the ratio of 19:12, while transactions in volume and value terms were down after stockbrokers traded just 161.31m shares worth N2.14bn, compared to the previous day’s 270.70m units valued at N5.63bn. Volume was boosted by trades in FBNH, Transcorp, Zenith Bank, Access Bank, and Sterling Bank.

Unity Bank and FTNCocoa were the best-performing stocks, gaining 8.6% and 6.45% while closing at N0.59 and N0.42 per share respectively on market forces. On the flip side, Cornerstone Insurance and Cutix lost 9.86% and 9.83% respectively, closing at N0.52 and N5.70 per share, purely on profit-taking.

Market Outlook

Being the last trading day of the week we expect the mixed trend on profit-taking and momentum investing as pullback create an opportunity for players to jump into positions on the strength of Q3 numbers, just as candlestick formation and volume traded at the end of day trading revealed sellers in control as the index slide down marginally. Also, we note that institutional players are not selling but positioning in blue-chip companies, as the pullback  was on a light volume. It is equally noteworthy that this pullback at this level is for the accumulation of more positions ahead of year-end seasonality. 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.

Invest 2022 Traders & Investors Summit

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1.  Balanced Trading: Playing Nigeria’s Multiple Exchanges For Diversification, MrOlatundeAmolegbe, CEO, Arthur Steven Asset Management  Ltd &President of CIS 
2. Agriculture, Economic Recovery & Diversification: Where Is Commodity Trading In Your Portfolio, Mr. AkinyinkaAkintunde, Business Development Manager, AFEX Commodities Exchange Ltd.
3. Technical Outlook & Indicators For Profitable Market Timing, Mr Abdul-Rasheed OshomaMomoh, Head Capital Market at, TRW Stockbrokers Ltd 
4. Benefits & Dangers Of Fixed Income Instruments In An Inflationary Environment, MrTeribaAdeboye, MD/CEO, Qualinvest Capital ltd
5. Economic Outlook and implications of the N16.45 Trillion 2022 Budget On Sectors/Stock Market, Mr. OluwasegunAkinwale, Senior Portfolio Manager,Coronation Asset Management Ltd
6. Profitable Stock Picks Made Easy, Using Fundamental Tools, Mrs. Ebiere Helen Fumudoh, MD/CEO, Norrenberger Securities Ltd
7. The Role of Real Estate & REIT Instruments In the Ecosystem, Mr Tope Ojo, Managing Partner,Tope & Tunde Estate Surveyors &Valuers 

8. Trade Opportunities & 10 Golden Stocks for 2022, Mr Ambrose Omordion, Chief Research Officer, Investdata Consulting Ltd

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CRO|Investdata Consulting Ltd




Tel: 08028164085, 08179547605