Market Update for November 3
Equity prices closed lower on the Nigerian Exchange at the midweek as the benchmark index continued its up and down movement on profit-taking amidst selloffs and repositioning in value stocks that suffered losses recently.
The selling sentiments in the midst of weak momentum and low traded volume revealed the absence of institutional investors and exit of funds as market players continue to interpret the recent corporate earnings released to the market.
Technically, the NGX index’s action remains relatively strong in the face of mixed technicals and indicators, with a high possibility of markup by the smart money which Thursday’s market forces will confirm, given that the current trend is strong with ADX reading 55.54 points, against the previous day 54.47, and money flow index of 66.47points on a daily chart. The possibility of a rebound is also high after market players finish digesting the recent earnings released to the market. We note that the numbers came largely better than expected.
However, these strong earnings, interim corporate actions, and level of liquidity in the equity space will determine the extent of this market rally when it rebounds from this pullback. Already too, all eyes are on happenings as regard global inflation and oil prices at the international markets, which is currently oscillating trade at four weeks low around $82 per barrel; besides the impact of the low oil consumption by China, as the direction of yields in the fixed income market remains unclear.
Meanwhile, midweek trading opened slightly on the upside and was sustained throughout the session, despite oscillating on buying interests in some high and low cap stocks in the midst of profit-taking. This pushed the key performance index to an intraday high of 42,151.04 basis points, from its lows of 41,969.42bps, which closed thereafter above its opening level at 42,013.39bps.
Market technicals for the session were mixed and weak with volume traded lower than the previous day’s in the midst of negative breadth and selling sentiment as revealed by Investdata’s Sentiment Report showing 86% sell volume and 14% buy position. The total transaction volume index stood at 0.74 points, just as the energy behind the day’s performance remains relatively strong, Money Flow Index dropped to 66.47 points, from the previous day 71.73 points, indicating that funds left the market.
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Index and Mkt Cap Movement
At the end of Wednesday’s trading, the composite NGX All-Share index shed 37.94 basis points, closing at 41,975.45bps after opening at 42,013.39bps, representing a 0.09% drop, just as market capitalization fell by N19.80bn, closing at N21.91tr, from the opening value of N21.93tr, also representing 0.09% value loss.
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Midweek’s downturn was driven by selloffs in Lafarge Africa, GTCO, UBA, Eterna, Zenith Bank, ETI, Champion Breweries, AIICO Insurance, Mansard Insurance and Lasaco, among others, which impacted mildly on Year-To-Date gain, as it reduces to 4.23%. Market capitalization stood at N770.98bn YTD, representing a 4.01% growth from the year’s opening value.
Performance indexes across the sectors were down, except for the NGX Consumer Goods index that closed higher by 0.09%, while the NGX Insurance index led the decliners after losing 1.52%, followed by Banking, industrial goods and Energy with 1.03%, 0.17% and 0.16% respectively.
Market breadth was negative, as losers outnumbered gainers in the ratio of 20:13, while transactions in volume and value terms were down, as market players exchanged 292.84m shares worth N2.06bn, compared to the previous day’s 318.91m units valued at N3.28bn. Volume was boosted by trades in FBNH, Multiverse, Mutual Benefits Assurance, Sterling Bank and Transcorp.
Universal Insurance and Multiverse were the best-performing stocks after gaining 10% each, close at N0.22and N0.22per share respectively on market forces. On the flip side, Lasaco and Chams lost 9.4% and 8.33% respectively, closing at N1.06 and N0.22 per share purely on profit-taking and selloffs.
We expect the mixed trend to continue as bargain hunters take advantage of corrections to reload their portfolios with value stocks on the strength of positive numbers, just as candlestick formation and volume traded at the end of day trading revealed the wait and see the mood of the market as the index continues to side trend. Also, we note that institutional players are not selling yet, as they watch the pullback 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.
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