Market Update for the Week Ended September 23 and Outlook for September 26-30
The selloff and profit taking momentum extended on the Nigerian Exchange for the third consecutive week, with the benchmark All-Share index closing lower ahead of its critical support levels. This is happening amid the continued declining traded volume that further confirms the wait-and-see attitude of market players, ahead of this week’s meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) in the midst of a grim economic outlook and sovereign risk.
Majority of the sectorial indexes witnessed selloffs as large cap stocks and blue-chip companies suffered losses, while position taking hit banking stocks despite the markdown of their prices for interim dividend and profit taking during the period. This is despite the fact that recent earnings from the industry revealed the undervalued state of those stocks, just as factors and policies needed to support the industry are unfolding amid inflationary pressure and slow economic recovery.
The low liquidity and oscillating yields in the fixed income market left the equity space relatively quiet since the back-to-back rate hike by the CBN in the last two MPC meetings, as reflected in the volume of transactions which indicated the absence of institutional investors like pension and fund managers. The latest macroeconomic reports and low supply in the market is an indication that smart money can mark-up the price any time. We must, however, wait for confirmation.
With another MPC meeting around the corner, many traders and investors are seating on the fence, after seeing the aggressive move of central banks across the globe on monetary policy tightening in the name of checkmating inflation. Given the recent body language, or even the statement of the CBN governor at the last MPC meeting, the committee members have since changed their slant, as reflected in the voting patterns at the last two meetings when the benchmark Monetary Policy Rate (MPR) was hiked by 250 basis points from 11.5% to 14%. This is the same committee that left rates unchanged for years before now, an indication that they are following the global trend among central banks. It is our belief that a further rate hike by the MPC will push the economy into yet another recession, the third under this administration. Such recession will manipulate spending, investing, employment and confidence
Meanwhile, market volatility continues to support technical traders in the midst of prevailing selling sentiments, which was as a result of panic selloffs in the midst of relatively low volume and higher earnings yields that signal a possibility of higher payouts at the end of the year. This is especially true of those that suffered losses in the midst of the strong numbers posted by these companies, thereby revealing their undervalued state, as seen in the high dividend yields pointing to the possibility of bargain hunters taking position to hedge against the soaring inflation.
The NGX index’s action on a weekly chart is still trading below the ‘T line’ and 50-day moving average, as selling sentiment continued across the sectors. Portfolio rebalancing has increased in the midst of interim dividend payment. 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 analysis 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.”
Movement Of NGXASI
The NGX had a bearish week with four sessions of down markets and one up, amid price adjustment for interim dividend from the banks, as other major sectors and blue chip stocks suffered losses to drive the oscillation and pullbacks that create opportunities for players to reposition their portfolios, amid interpretation and analyses of macroeconomic data and earnings released recently.
The week’s trading started on a negative note, extending the previous session’s loss, by 0.07%. This trend was halted on Tuesday when the NGX index gained a marginal 0.01%, before pulling back at the midweek by 0.05%, which was extended to Thursday and Friday when the market lost 0.47% and 0.33% respectively, on UBA’s markdown, amid selloffs in Guinness Nigeria, BUA Cement, NGX Group and others stocks. These brought the week’s total loss to 0.91%, compared to the previous week’s 0.44% loss position.
In all this, the composite NGXASI shed 448.80 basis points, closing at 49,026,62bps, compared to the week’s 49,475.42bps opening level, after touching an intra-week low of 48.994.15bps and a low of 49,479.45bps. Market capitalisation also fell by N241bn during the period, closing at N26.45tr, from the previous week’s N26.69tr, which also represented a 0.91% depreciation in value.
During the period under review, the advancers table was dominated by low and medium cap stocks as selloffs hit high priced stocks amid volatility and selling sentiment. Also notable is the fact that investors are taking advantage of the price correction to buy into value and high dividend yield companies.
Market breadth during the week remained negative as losers outnumbered gainers in the ratio of 42:17 on selling pressure as revealed by investdata sentiment report showing 7% ‘buy’ volume and 93% sell position. Money Flow Index was looking up at 32.61bps from the previous week’s 31.53 points, an indication that funds entered the market on a weekly chart, despite the down market.
The NGX index action in a bearish channel on the weekly and daily time frame, with low traded volume to signal cautious trading, as decline phase continued on a daily time frame to trade below the T line on a selling sentiment and weak momentum, as the market remains relatively strong in the midst of increased volatility and low liquidity. We note also that the index is trading slightly below the ‘T’ line and 50-day moving average on a weekly time frame to signal possibility of downtrend, which outcome of policy announcement from MPC meeting can reverse or dip further.
Bearish Sectoral Indices
Sectorial performance indexes for the week were in red, except for NGX Banking that closed higher by 2.27%, while NGX Energy led the decliners after losing 4.68%, followed by Industrial goods, Insurance and Consumer goods with 3.92%, 2.08% and 0.16% respectively.
Transactions in volume and value were mixed, after stockbrokers traded 562.86 shares worth N9.44bn, compared to the previous week’s 719.40m units valued at N8.01bn, with volume driven by Financial Services, ICT and services industry. Specifically, the week’s volume was driven by trades in Zenith Bank, NGX Group, GTCO, Etranzact and Accesscorp.
Vitafoam and Fidelity Bank were the best-performing stocks for the week, gaining 12.25% and 10.85% up respectively, closing at N22.45 and N3.78 per share on positive earnings and market forces. On the flip side, Academy Press and NGXGroup lost 22.73% and 13.92% respectively, at N1.70 and N17.00 per share, purely on price adjustment and selloffs.
Outlook for the week
We expect a mixed trend on outcome of MPC meeting and bargain hunting, as market players digest macroeconomic data in the midst of end of the quarter window dressing by fund managers. Also, as investors are repositioning their portfolio on the strength of Q3 earnings expectation. Just as players continue react to the earnings power and revalue of quoted companies on their earnings performance. We note that income investors have sustained buying into dividend-paying stocks with high yields.
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