Mixed Trends Amid Bargain Hunting, As Investors Bet On Sept Inflation, Q3 Earnings, Await Policy Triggers

Market Update for the Week Ended October 13 and Outlook for October 16-20

Nigeria’s stock market sustained its bullish run for the second consecutive week in the midst of increased volatility, buying sentiment and policy adjustments by the central bank, which last week lifted the ban on 43 items from access to FX on the official windows, even as investors are looking forward to macroeconomic data and corporate earnings.
This seeming policy summersault and lack of clarity on the policy direction of the economic managers are likely to dampen confidence and perception among market players, not minding the continued activities of bargain hunters, or the position taking and buying interest in blue chip companies during the week that supported the rebound witnessed so far.
All eyes are on the complimentary plans and policies of the fiscal and monetary authorities which will believe would see the recent CBN moves through in the short to medium term. We reiterate the need for long-term national roadmap aimed at resuscitating the Naira, besides the urgent need to drive industrialization and make the economy productive, a move that would enhance and sustain the value of the national currency on the long-run.
There was a cheery news last week that Nigeria’s crude oil production rose to 1.35 million barrels per day in September, the highest output since January 2022, exclusive of condensates, which comes to 1.7mbpd including condensates, due to the improved security situation in the nation’s Niger-Delta region.
It was a positive outing in the period under review as the NGX index’s action remained on its consolidation range, after the 2008 strong resistance level turned another strong support level, while the market trades above the 67,000 points mark. The market is waiting for a positive catalyst and the usual seasonality seen in the face of declining yields in the fixed income segment amid the rising inflation that continues to influence portfolio repositioning and sectorial rotation by investors.
The NGX All-Share index remained above the T line on a daily and weekly time frame to resist further decline, ahead of its critical support levels, amid buying interests in highly priced stocks, which pushed the indicators higher in the midst of a continued oscillation in transaction volume pattern. This further confirmed the wait-and-see attitude of market players, who are on the lookout for economic numbers and corporate earnings, in the face of a dicey economic outlook and sovereign risk concerns.
The relatively low volume of transactions in the market is also an indication that smart money can mark-up the price at any time and without notice. These, notwithstanding, we urge investors to wait for confirmation of the trend, with bargain hunters already taking advantage of the ranging market to position in stocks with strong earnings capacity. just as FBNH notified the market of its right issue at N15.00.
Meanwhile, market volatility continues to support technical traders in the midst of prevailing buying interest and mixed sentiments, resulting from portfolio repositioning and sector rotation in the midst of middle east war and earnings expectation that signal the possibility of higher payouts at the year-end. This is especially true of those that suffered losses in the midst of the strong numbers posted by these companies, which revealed 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 in the country.
To navigate Q4, 2023 market volatility and its 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 rebounded sharply to $90.89 per barrel in the midst of the ongoing middle east war, inventory build up and fear of rate hikes as part of measures that may likely be adopted to check the raging inflation. This is even as Russia restored diesel supply to Europe, as fear of a global recession resurfaced. We note also the rising geopolitical tensions across the globe and supply disruptions longer, 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
It was a bullish week of four trading sessions of upmarket as a result of position taking and one day down-market of selloffs. The buying sentiment in the major sectors of the market and blue chip stocks supported the uptrend, thereby creating opportunities for players to reposition their portfolios, amid interpretation and analyses of the prevailing macroeconomic conditions and expected quarterly earnings inflow.
Trading for the week opened on a positive note, wiping out the previous session’s loss, after gaining 0.97%. This was however short-lived as index lost 0.17% on Tuesday due to selloffs and profit booking, which was halted at midweek as investors gained N63.52bn, representing 0.17% rise. On Thursday and Friday, the index inched up by 0.05% and 0.10% respectively on bargain hunting. bringing the week’s total gain to 1.12%, compared to the previous week’s 0.11% positive position.
In all these the NGX All-Share Index gained 746.12 basis points, closing at 67,200.69bps, compared to the week’s 66,454.57bps opening level, after touching an intra-week high of 67,214.30bps and a low of 66,454.57bps. Market capitalisation also rose by N409.9bn, representing a 1.12% appreciation in value during the period.
The week’s advancers’ table was dominated by low priced stocks and blue chip companies amid the position taking that hit high priced stocks due to volatility and buying sentiments. 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 was positive as gainers outnumbered losers in the ratio of 37:33 on buying sentiments as revealed by investdata sentiment report showing 98% ‘buy’ volume and 2% sell position. Money Flow Index was looking down at 76.59bps from the previous week’s 80.71 points, an indication that funds left the market on a weekly chart, despite the up market.

Technical View
The NGX index action continued in its distribution phase as the index consolidated on the weekly and daily time frame with low traded volume signaling wait and see for traders, while position trading is ongoing by investors, as the market trades above the T line on a daily and weekly time frame to sustained its uptrend in the midst of increased volatility and improving liquidity. We note also that the index is trading above the 50-day moving average on the weekly time frame to signal possibility of continuation or reversal, which the state of Q3 financials and September consumer price index will determine.

Bullish Sectoral Indices
The sectorial performance indexes were up, except for NGX Banking that closed lower by 0.8%, while the NGX Industrial goods led the advancers’ after gaining 5%, followed by Consumer Goods, Insurance and Energy with 1.4%, 0.9% and 0.3% respectively.
Activities in volume and value were mixed, as market players exchanged 1.47bn shares worth N18.22bn, compared to the previous week’s 2.41bn units valued at N22.12bn. Volume was driven by Financial Services, Healthcare and Consumer goods. The was boosted specifically by trading in Neimeth Pharm, Fidelity Bank, Accesscorp, UBA and Transcorp.
Thomas Watt and ABC Transport were the best-performing stocks for the week, gaining 30.84% and 23.08% respectively, and closing at N2.80 and N0.80per share on sentiment and market forces. On the flip side, Prestige Assurance and Royal Exchange Assurance lost 10%and 9.58% respectively, at N0.45 and N0.47 per share, purely on profit taking and selloffs.

Outlook for the week
We expect mixed sentiment and trend to continue on bargain opportunities and reaction to the September inflation report and Q3 earnings reports as early filers hit the market with their scorecards. Also, Investors and traders await the unveiling of agenda by CBN new management term and key Ministries. However, retracement to the 65,559.46bps level and below is possible on profit taking as global and domestic events unfold.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605