Mixed Trends Ahead On NGX, As Reactions To Shake Up At CBN May Dampen Earnings News

Market Update for the Week Ended September 8 and Outlook for 18-22

Volatility and selloffs continued on the Nigerian Exchange in the first half of September as market players seemingly reacted to news that Nigeria’s central bank forbade banks from paying dividends from their foreign exchange revaluation gains, or deploying such for their operations. Also, the market also witnessed reactions to last weekend’s downgrade of the nation’s equities in the FTSE/JSE All Africa Index Series, which resulted in sell pressure at the beginning of the week, throwing the key market index into the red, and panic mood. In the process, the market perhaps forgot that there has been a major shift in the market’s holding structure since March 2020 when foreign portfolio investors sold down their stake, pushing the NGXASI to its 11-year low, after which there was a rebound on the back of a recovery in oil price, and an increase in domestic participation especially by institutional investor like Pension Fund Administrators, and insurance companies, among others. There were also the impacts of improved corporate performances that supported higher dividend payouts and mixed macroeconomic policies. These factors had combined to sustain the market for the past four years, in addition to the listing of new companies and additional shares by existing ones.
The mixed performance and bearish momentum during the period reflected the price adjustment for dividends, sentiments and reaction to earlier adduced reasons, the impact of which was mitigated by the strings of impressive earnings, especially from first-tier banks, particularly the positive change in interim dividend policy as anticipated, which supported the market and individual stocks. Particularly, UBA grew its interim dividend by 150% to 50 kobo from 20 kobo in 2022. Also, Zenith Bank raised its own to 50 kobo, against the traditional 30 kobo paid in 2022.
It is noteworthy that the Q3 earnings reporting season is around the corner, even as President Bola Tinubu continues to consolidate his hold on the economy and build his team, the latest of which was last Friday’s clean sweep of the Board of Governors at the CBN, nominating replacements led by Michael Olayemi Cardoso, his former commissioner for Budget and Planning as Lagos State Governor between 1999 and 2007. The appointment of Cardoso is expected to result in a handsake between monetary and fiscal policies rather the previous unhealthy rivalries, especially with Olawale Edun, Cardoso’s colleague commissioner as Finance Minister. This, it is hoped, will put the economy in the path of growth as promised by the administration, in the midst of the current economic challenges, especially events that happened since June 2023. The fact that the scorecards of banks are in the green has offered an insight into what investors would likely see across the industry at the end of the current financial year.
The tension arising from Nigeria’s high inflation, interest rates and mixed yields continue to drive volatility on her equity market yesr-to-date, amidst Consumer Price Index for the month of August at 25.80%, rising for the eighth time in 2023 against 24.08% in July, as food prices soared across the country. Even then, all eyes are on the ongoing reforms by government, amid hopes of resolving the exchange market problem, and policy consistency, among others.
The continued portfolio rebalancing and weak market momentum reflected on the decliners and advancers’ table for the week, as price adjustment dates of many companies for interim dividends come up this month and early October, besides profit taking and reactions to expected earnings reports of Accesscorp, Mansard and Consolidated Hallmark Insurance.
Also, most listed companies have made their Q4 earnings forecast available on the Exchange. We note also that the NGX’s Price-to-Earnings ratio remains relatively low and attractive for investments, following which we foresee a mixed trend in the market in this Q3 and beyond. Looking at the mixed rates in the money market, especially TB, that inched up to 12.98% and 6.5% for the 364 and 91-day bills respectively, while the 182-day rates remain unchanged at 7% at the last primary auction.
To navigate Q3, 2023 market volatility and the rest of the year mixed outlook 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 market correction. As volume of transaction witnessed within the week remain above the average traded volume, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.
Oil price during the week under review continued its oscillation, hitting 10 months high to trade at $93.93 per barrel in the midst of improved industry production reports in China and Westen central banks rate hikes cycle coming to end with the last hike in September. Just as fear of a global recession and weak demand continued. We note also the rising geopolitical tensions across the globe and supply disruptions due to the Russia-Ukraine war that has lingered for more than a year, and is indeed escalating. The up and down movement of oil prices also continues to drive volatility across different investment windows.

Movement Of NGXASI
Meanwhile, it was a bearish week, with the NGX recording two trading sessions of positive outings, while the other three were down. This down market was attributed to profit taking, selloffs, reaction to the NGXASI downgrade and adjustment for dividends recommended by company directors. This pushed the index’s action sharply on a mixed sentiment, ahead of more corporate earnings that now make the market attractive for technical traders as they keep their eyes on strong support and resistance levels.
Trading for the week started on a negative note, halting the gains recorded in the previous session as the NGX All-Share index lost 1.24%, a trend it sustained on Tuesday when it shed 0.81%, before midweek’s 0.93% rebound on the resurgence of increased buying interests, after which there was a marginal 0.06% pullback. The index retraced up on Friday with slight gain of 0.09%. This brought the week’s total loss to 1.10%, against the previous week 0. 91% gain.
Consequently, the benchmark NGX All-Share Index shed a total of 747.60 basis points, which close at 67,397.74bps, from the previous week’s 68,143.34 points closing level. Within the period, the index even touched an intra-week low of 66,485.44bps, from its highs of 68,162.71bps. Similarly, market capitalisation fell by N409bn, also representing a 1.10% value loss at N36.89tr, from the previous week’s N37.30tr,
The week’s top gainers chart was dominated by low and medium cap stocks amid selloffs and mixed sentiments in dividend paying companies as volatility and portfolio repositioning continued. Also notable is the fact that market players were accumulating positions after seeing the audited half-year results of first-tier banks and others, while different sectors and their Q2 performance ahead of Q3 numbers. So buying into value, strong earnings and high dividend yield companies continued, as the market’s recovery and mixed trend persisted, heading for 70,000 and 68,457.06bps levels again.
Market technicals revealed a negative breadth as losers outnumbered gainers in the ratio of 32:53 on a mixed sentiment as indicated by investdata sentiment report showing 54% ‘buy’ volume and 46% sell position. Money Flow Index looking down to read 84.40bps, from the previous week’s 90.67points, an indication that funds left the market on a weekly chart to reflect selloffs and profit taking in major stocks and sectors of the market, in the face of high inflation rate and uptick in fixed income market yields.
The NGX index’s action witnessed a pullback at the peak after testing 68,457.06bps to trade above the T-line, 20-Day moving average and 50 DMA on a less than average traded volume to formed a hammer bearish pattern, which is a bearish candlestick that supports a downtrend, which need to be confirmed in the new week as more financials are expected in the market, ahead of MPC meeting.
Despite the mixed sentiments and momentum, there were yet position taking as the benchmark index traded above its 50 and 100-Day moving average, even as correction is ongoing in the market, the state of the numbers and improved liquidity on payment dates will signal reversal or continuation of trend. This depends on market forces as all eyes are on more financials that will give direction as trading opens on Monday. We note that the volume which supported this correction and pullbacks remains mixed and above the market’s traded average, just as reaction to the nomination of New CBN Governor and others could support reversal at this level.

Bearish Sectoral Indices
The sectorial performance indexes for the week were in the red, save for the NGX Insurance that closed 0.46% higher, while the NGX Banking led the decliners’ after losing 3.24%, followed by Energy, Consumer and Industrial Goods with 2.02%, 1.84% and 0.28% respectively.
Activities in volume and value were up, as market players executed 2.93bn shares worth N47.45bn, compared to the previous week’s 2.64bn units valued at N45.45bn. Volume was driven by Financial Services, Oil/Gas and Conglomerates sectors, boosted by trading in UBA, Transcorp, Accesscorp, Oando and Chams.
Oando and Chellarms were the best-performing stocks for the week, gaining 42.86% and 32.76% respectively, closing at N11.00 and N3.85per share on sentiment and market forces. On the flip side, ABC Transport and Omatek had 33.68%and 31.03% respectively, at N0.75 and N0.40 per share, purely on profit taking and selloffs.

Outlook for the week
Despite last week’s mixed sentiments, for discerning investor and smart money, the market’s present value supports an uptrend, depending forces at play in the midst of price adjustments and earnings expectations. One issue that investors and traders may as trading opens Monday is the weekend’s sack of the acting CBN governor and four deputy governors by the Federal Government. Investors and traders are awaiting the unveiling of agenda, at least by the key Ministries. However, retracement to the 65,559.46bps level and below is possible on profit taking as global and domestic events unfold.

Theme: Thriving In A Changing Macroeconomic Climate: Identifying Opportunities, Waves & Paths On NGX
1, Navigating Market Dynamics: Insights For Profitable Strategies- Alhaji Garba Kurfi, MD/CEO APT Securities & Funds Ltd)
2, Mastering Market Volatility: Chart & Analysis For Higher Returns- Mr Abdul-Rasheed Oshoma Momoh, Head Capital Market at, TRW Stockbrokers Ltd
3, The Power of Macroeconomic Data In Equities’ Trading & Investing- Mr Olatunde Amolegbe, MD/CEO, Arthur Steven Asset Management Ltd
4, Understanding The Link Between Fundamental, Technical and Sentiment Analyses In Picking Stocks- Mr Ambrose Omordion, CRO, Investdata Consulting Ltd.

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CRO|Investdata Consulting Ltd