Mixed Trends Linger, As Pullbacks Create Buying Opportunities On NGX

Market Update for September 12

The bearish momentum and pattern on the Nigerian Exchange continued for the secondary session on Tuesday as investors apparently reacted to news of the FTSE Russell downgrade of Nigeria’s stock market index from the frontier global markets benchmark. The decline in the NGX All-Share Index was on a high traded volume, locking in traders in poor position by smart money, thereby reflecting the weakness of the market at this level of selloffs and mixed sentiments.
The losing momentum of the benchmark and other sectorial indexes slowed down as the pullbacks witnessed so far has created buying opportunities for discerning investors to accumulate fundamentally sound stocks with high upside potentials for earnings growth.
Meanwhile, the banking sector has again shown its resilience as more first-tier banks grace the market with their impressive half-year earnings reports. The stellar performances by UBA and Zenith Bank have supported 150% and 66.67% growth in their interim dividend payouts. These have given market players an insight into what to expect by the year-end. As such, it is important that we trade and invest wisely ahead of events and factors that will shape the market in the final quarter of this year.
As the Q3 earnings reporting season draws to a close, invest are betting on the expected release of the August inflation data, as well as half year numbers from Accesscorp, AXA Mansard and Consolidated Hallmark Insurance along with interim dividends. Other factors playing out include the possible slant of the coming MPC meeting, among others, especially developments in the fiscal space. Investors should trade consumer and industrial goods stocks with caution as Q3 numbers will still reflect impacts of the ongoing FX challenges in their earnings reports. So market players should target services industry stocks, particularly those with strong fundamentals and earnings power capable of supporting price and higher dividend payment as they rebalance their portfolios. These are against the backdrop of the changing market conditions and trading environment, due to the macroeconomic headwinds, mixed corporate earnings and the prevailing mixed outlook for fixed income instruments yields and rates in the face of rising inflation, high interest rates and exchange rate challenges due to the high volatility in the FX market.
The NGX All-Share index at the end of Tuesday’s trading broke down another support level and psychological line of 67,000 to test 66,485.40 basis points as it continues on the decline phase to trade below the T-line, having formed a hammer candlestick that indicates reversal underway. However, let us wait to confirm the strong support level, as the 2008 resistance level turns another support to watch out for.
To navigate the rest of the quarter and year profitably using fundamental and technical analysis, join investdata’s 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 selloffs. Despite the mixed volume pattern witnessed in recent days, it is time to shop for undervalued stocks, sector rotation, go for defensive stocks at the next insider playing opportunity.
Oil price oscillation continued, as it rebound sharply to trade at $92.29 per barrel in the midst of supply disruption in Syria and production cut by Saudi Arabia, even as fear of rate hike and recession resurfaced. The Russia-Ukraine war remains a major concern, the prevailing high interest rate regime and slowing inflation. Also, supply tightened due to the Russia-Ukraine conflict that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Meanwhile, Tuesday’s trading started on the downside, which was sustained throughout the session, despite oscillating on panic selloffs and positon taking in some stocks. This situation pushed the index to an intraday low of 66,485.40bps from its highs of 67.198.80bps, before closing below the opening figure at 66,760.20bps.
Market technicals were negative and mixed with a higher volume traded when compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 39% buy position and 61% sell volume. The total transaction volume index stood at 1.54 points, just as impetus behind the day’s performance was strong, with Money Flow Index reading 64.87pts, from the previous day’s 72.74pts, indicating that funds left the market.
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Index and Market Caps
The composite NGXASI closed 535.98bps down, at 66,760.20bps, from its 67,296.18bps opening level, representing a 0.80% decline. Market capitalization also fell by N293.35bn to N36.54tr, from the previous day’s N36.83tr, which also represented a 0.80% depreciation in value.

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Tuesday’s downturn was driven by selloffs and profit taking in the shares of MTN Nigeria, Zenith Bank, Accesscorp, Nestle, Dangote Sugar, UBA, Eterna, Omatek, Mansard, Nascon and Cornerstone , among others. This impacted negatively on Year-To-Date gain, reducing it to 30.26%, while Market Capitalization YTD gain stood at N7.48tr, representing a 32.64% rise above its opening level for the year.

Bearish Sector Indices
Sectoral performance indexes were down, except for the NGX Industrial Goods that closed higher by 0.03%, while NGX Banking led the decliners after losing 2.60%, followed by Insurance, Consumer and Energy with 2.31%, 1.72% and 0.28% respectively.
Market breadth was negative as gainers outnumbered losers in the ratio of 44:15, while transactions in volume and value were up after investors exchanged 645.54m shares worth N11.01bn, driven by trades in Transcorp, UBA, Accesscorp, Fidelity Bank and GTCO.
CWG and Vitafoam were the best performing stocks, gaining 10% and 9.78% respectively, closing at N6.93 and N24.70 per share each, on market forces. On the flip side, Etranzact and Regency Insurance lost 10% each, closing at N8.10 and N0.36 per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect mixed sentiments and slowdown in the rate of selloffs on bargain hunting ahead of the release of half-year earnings reports by Accesscorp and interim dividend from Chi Plc and Mansard in the midst portfolio reshuffling for quarter end and continued sector rotation.
However, pullbacks are creating buying opportunities amidst the economic reforms of the government, just as more policy pronouncements and economic managers hit the ground running, a situation expected to offer investment direction eventually.
We note that discerning investors have continued to target fundamentally sound companies and defensive stocks to protect their portfolios. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price rally to take profit, while also looking at the trends and events across the globe and domestically.

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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Tel: 08028164085, 08179547605