Equities

Mixed Trend, As Bargain Hunters Position Ahead Of Month-end, Q3 Earnings Season

Market Update for the Week Ended Sept 24 and Outlook for September 27-30

The last full trading week of September ended with a mixed performance and trend to further resist decline as the key performance index closed marginally higher, thereby extending the seeming positive outing for the second consecutive week on a very high traded volume and positive sentiment to signal a reversal as investors’ psychology during the period led to a hammer candlestick formation that supports an uptrend.

The seeming mixed markets globally due to fear of a possible default by Evergrander in the payment of its debt obligation and the news that China had declared the use of cryptocurrency illegal led to selloffs in many crypto futures, among others ahead of the 2021Q3 earnings reporting season. This was just as the result of calm and corrections in the domestic market gathered strength over the last two trading sessions of the week under review to retrace up on positive breadth.  The daily chart at the end of Friday’s session confirmed the reversal after breaking out 38,906.09 basis point mark on a huge volume as projected, revealing the presence of institutional players, as already shown in many technical indicators that signal a positive move in dividend-paying stocks and blue-chip companies.

With such investing strategy of buying on the pullbacks or dip, remain active as many discerning traders and investors took advantage of the intraday oscillation on Thursday and Friday to reposition and accumulate growth and value stocks that suffered losses in recent days. 

NGX index action on a weekly chart revealed positive momentum of 100% investor sentiment, ADX above 20 points, and money flow index reading 56.22 which is above 50 to show a relative money flow in the market. These are indications that confirm the daily move and volatility, as the NGX index is set to break out the 39,290.80bps and then confirm a reversal on the weekly time frame. So we have to wait and see what happens in the new week and earnings season month.

The rise in transaction volume, during the recent session and week, is an indication that investors are gradually returning to the market after studying the latest macroeconomic data and happenings in the system ahead of quarter-end and earnings reporting season. Also, liquidity is returning to the stock market, just as the oil price is looking up in the international market to support market fundamentals.

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Movement Of NGXASI

Trading for the week recorded a mixed trend with three sessions of the down market and two of upmarket. The NGX index started the period on a negative note, halting the previous day’s gains after losing 0.09%, which was extended to midweek when it shed 0.10% and 0.03% respectively on low traded volume. It however rebounded on Thursday when the index recovered 0.07%, which was sustained on Friday when the index closed higher by 0.20% on a huge volume that brought the week’s total gain to 0.05%, compared to the previous week’s 0.06% positive position.

Consequently, the benchmark index gained 18.41 basis points, closing at 38,962.28bps from its opening level of 39,943.87bps, after touching an intra-week high of 38,962.28bps from its lows of 38,832.05bps on positive sentiments for medium cap and low priced stocks as highly-priced equities remained flat.  Market capitalization during the period rose by N10.12bn, closing at N20.30tr, compared to the previous week’s N20.29tr, which also represented a 0.05% in value gain, despite price adjustment in Stanbic IBTC and UBA for an interim dividend of N1.00 and 20 kobo respectively as declared by their directors.

The advancers table for the period was dominated by low and medium-priced stocks which had become the toast of investors, particularly Pharma-Deko, Nahco, Conoil, Cornerstone Insurance, Transcorp Hotel, MRS Oil, Consolidated Hallmark Insurance Plc, and Eterna, among others. This was due to continued repositioning ahead of Q4 seasonality, even as the NGX Index and price actions revealed the presence of buyers in the market, a situation that is yet to reflect on the sectorial indexes.

Market breadth was positive on a very high traded volume to resist the further decline and signal position-taking by traders, with gainers outnumbering losers in the ratio of 28:23, on positive sentiment as revealed by investors’ sentiment report showing 100% by volume. Money Flow Index dropped slightly to 56.22bps from the previous week’s 57.32 points, an indication that some funds left the market.

NSEASI WEEKLY CHART MOVEMENT

The NGX index’s action, again resisted pressure to slide further down after pullbacks to form a hammer candlestick pattern that supports an uptrend, as the benchmark index maintained two successive weeks of positive outing to reveal the return of players after sitting on the fence. The index action remained within a consolidating rectangle and on a strong support level.  The candlestick formation indicates the return of strength as bargain hunters buy into the pullbacks. We, however, need to watch out, as market players digest economic data, fixed income market yields, and oil prices that should further support market fundamentals to attract liquidity to the equity space.

Mixed Sectoral Indices

The performance indexes across the sector were mixed, with the NGX Banking and Consumer goods closing 0.43% and 0.04% lower respectively, while NGX Insurance led the advancers after gaining 1.75%, followed by Oil/Gas and Industrial goods with 1.38% and 0.23% respectively. Activities in volume and value terms were up, as players exchanged 1.29bn shares worth N13.92bn, compared to the previous week’s 856.29m units valued at N10.75bn. Volume was driven by Financial Services, Consumer Goods, and Conglomerates, particularly FBN Holdings, UBA, GTCO, Zenith Bank, and Transcorp.

Pharma-Deko and Nahco were the best-performing stocks during the week, after gaining 32.10% and 15.13% respectively, closing at N2.14 and N3.50 per share respectively on positive market sentiments and forces. On the flip side, SCOA and Presco lost 17.92% and 8.18% respectively, at N0.87 and N73.00 per share, purely on selloffs and profit-taking.

Outlook for the week

We expect a mixed trend as bargain hunters take advantage of pullbacks in fundamentally sound stocks to position, just as fund and portfolio managers window dress their positions ahead of quarter-end and Q3 earnings season. As many stocks enter their buy range to attract funds into the equity space.  Also, investors are still observing the interplay of forces in the FX market as the CBN gives a guideline for the new digital currency platform comes October 1. Last week’s high volume suggests that institutional investors are entering the market and others. It is noteworthy that oil prices rebounded to trade above $77 in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.

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