Market Update for the Week Ended November 4 and Outlook for Nov 7-11
Trading activities on the Nigerian Exchange finished the first trading week of November higher on a high traded volume, to signal the return of strength to the market amid buying sentiments, as market players expectedly reacted to the impressive company earnings with corporate actions, in the midst of a seemingly low liquidity and confidence due to the increasing economic headwinds and sovereign risk ahead of 2023 general election.
The increasing number of Q3 interim dividend paying companies that will be putting smiles on the faces of investors ahead of the festive period, despite the continued mixed sentiment and selloffs among the blue chip stocks, as well as the better than expected numbers posted by them, also reveal value and higher upside potentials that continues to impact returns for investors. These investors are discerning enough to take the advantage offered by the prevailing low stock prices, as the benchmark NGX All-Share Index closed positively after two consecutive weeks of decline on a negative market breadth.
As a market player, you should understand that the economic and stock market cycles are related but not the same. The stock market has a cycle that tends to lead or lag the economic cycle. So the ability to recognize the big picture at any time will help players to make informed decision as regard trading and investing in stock market profitably.
Factors that drive sectors and industries performance in different time differs with seasons, policies and others, because sectors and commodities generally perform better or worst during different times within the stock and economic cycles. Since the health of any economy is measured with lagging indicators, the stock market is forward-looking. Equity investors do not focus on where the economy has been, but n where they think it is going in the coming months. While economists read the latest economic reports of lagging data, stock investors attempt to read the economic “tea leaves” for clues about future direction.
As a trader and investor looking to pull money out of the market regularly, the only thing you are really looking for is the price of the investment you bought to move in your favour. So, common sense tells us that “Only Price Pays,” not news, not how much we love a stock or company. If the price does not move, you do not make any money. So price movement is what pays us, then it’s only logical that we focus mainly on the price. Most indicators are based on price, so they lag the last traded price for an investment. Some indicators, like the 50-day moving average, which many traders use, are actually lagging that investment by 50 days.
The NGX index’s action on a weekly chart is still trading below the ‘T line’ and 50-day moving average, as buying sentiments rekindled in some sectors, just as portfolio rebalancing has increased on impressive earnings and expected year end seasonality. It is, therefore, time to use technical tools, if you have been ignoring the charts and fighting the trends, it is your chance to step up your game. At this current market mood, investors and traders should target leaders in the various sectors with strong fundamentals, and positive technicals as the market is on uptrend movement on the strength of funds entering the equity space.
To navigate this current market situation profitably using fundamental and technical analyses 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 price sustained its oscillation as it rebound again to trade at $98.57 irrespective of the fear of recession, in the midst of supply tighten due to Russia Ukraine war. Also, weak demand as stronger dollar influence purchasing power in the face of the global 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 as rising interest rates and inflation. The bailout package of the Chinese government to simulate economic activates and stable employment as a positive fore, as well as that of Europe aimed at managing the energy crisis.
Movement Of NGXASI
The NGX had a mixed trend of three down sessions and two of up market, after major sectors and blue chip stocks recorded loses, save for industrial goods that was driven by price appreciations in BUA Cement and Dangote Cement that create opportunities for players to accumulate more at lower prices, amid stronger corporate earnings report and macroeconomic reports expectation.
Just as trading for the period started on a negative note, extending the previous session’s loss by 0.17%. This was sustained on Tuesday with index shedding 0.21%, but rebound at midweek with the gain of 1.23% on renewed buying interest in Dangote, but halted the rebound on Thursday with 0.10% pulled back and reversed up on Friday by 0.10% to bring the week’s total gain to 0,81%, compared to the previous week’s 1.09% loss.
Consequently, the composite NGX All-Share Index gained 356.54 basis points, closing at 44,269.18bps, compared to the week’s 43,912.64bps opening level, after touching an intra-week high of 44,286.16bps and a low of 43,626.57bps. Market capitalisation also rose by N194bn, representing a 0.81% value gain during the week to closed at N24.11tr, from the previous week’s N23.928tr,
The week’s top advancers’ table was dominated by low and high priced stocks, amid buying sentiment in blue chip companies, despite the volatility and portfolio repositioning. Also notable is the fact that investors are taking advantage of the price corrections to buy into value and high dividend yield companies.
Market breadth was negative as losers outnumbered gainers in the ratio of 43:20 on positive sentiment as revealed by investdata sentiment report showing 97% ‘buy’ volume and 3% sell position. Money Flow Index looking flat to 10.67bps, from the previous week’s 10.75 points, an indication that funds did not leave the market on a weekly chart to reflect position taking in the market.
The seeming rebound on NGX index action may likely continue, but in undulation movement as market players digest and reacts to the recently released numbers, at the same time positioning for the interim dividend announced by these companies, as traded volume for the period improved irrespective of the low liquidity and absence of institutional investors while the mixed trend continued on the daily time frame to trade below the T line on a buying sentiment and improving momentum. We note also that the index is trading below the ‘T’ line and on 50-day moving average on a weekly time frame to signal possibility of sustained rebound, as actual Q3 financials and October consumer price index can support further or pullback.
Bearish Sectoral Indices
Sectorial performance indexes for the week were down, except for the NGX Industrial goods that closed higher by 3.95%, while the NGX Energy led the decliners after losing 5.37%, followed by consumer goods, Banking and Insurance with 2.02%, 1.87% and 1.35% respectively.
Activities in volume and value were up, as stockbrokers traded 1.41bn shares worth N15.51bn, compared to the previous week’s 598.82m units valued at N14.86bn, with volume driven by Financial Services, Agriculture industry and conglomerates. Specifically, the week’s volume was driven by trades in Accesscorp, FTN Cocoa, Fidelity Bank Transcorp and GTCO.
FTNCocoa and Nahco were the best-performing stocks during the week, gaining 13.33% and 10.47% respectively, closing at N0.34 and N5.70per share on market forces and impressive earnings. On the flip side, Chams and Ikeja Hotel lost 14.81% and 12.96% respectively, at N0.23 and N0.94 per share, purely on selloffs.
Outlook for the week
We expect a mixed trend on interim dividend qualification dates and bargain hunting as players continue to digest and reaction to companies financial, while all eyes are on macroeconomic reports. Also, investors are repositioning their portfolios on the strength of Q3 earnings,
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As a trader and investor looking to pull money out of the market regularly, the only thing you are really looking for is the price of the investment you bought or sold-short to move in your favor. So, common sense tells us that “Only Price Pays,” not news, not how much we love a stock or commodity. If the price does not move, you do not make any money, period.
If price movement is what pays us, then it’s only logical that we focus mainly on the price. Most indicators are based off of price, so they lag the last traded price for an investment. Some indicators, like the 50-day moving average, which many traders use, are actually lagging that investment by 50 days.