Mixed Trends, Profit Taking Still, As Investors Bet On Inflation, MPC Outcome

Market Update for the Week Ended Sept 8 and Outlook for September 11-15

The Nigerian equity market witnessed yet another mixed trend last week, extending the bull dominance as buying interest in banking and consumer goods stocks impacted the benchmark NGX All-Share index positively despite profit taking and selloffs in the other sectors which sustained the uptrend seen in the first full trading week of September.
Consequently, the bullish momentum on the NGX continued into the last month of Q3, despite the mixed activities at the new peak of the market after a material shift in the benchmark index when it broke out the 2008 strong resistance levels to trade above 68,000 basis points. Also in the new week, all eyes are on the August consumer price index and audited half year financials of the last three first-tier banks- Zenith, Accesscorp and UBA, as well as the Monetary Policy Committee meeting in the new week, and before the month-end.
This mixed sentiment and trend was driven by hints of mergers, acquisitions and delisting during the week as investors’ buying sentiment recorded 65% for the period with money flow index at 90.67. This revealed that buyers are still in charge in the face of selloffs in some stocks, amidst repositioning in others, which kept funds flowing into the equity segment of the financial market.
Despite the optimism surrounding Q4 projections due to seasonality and growing volatility in the midst of macroeconomic headwinds and change in the trading environment, it is noteworthy that in any uncertainty or challenging environment, there are opportunities for discerning investors and smart traders. This is therefore the time to look at the sectors or industries with the upside potential to create value.
Buying interests and mixed sentiments continued as portfolio rebalancing and sector rotation persisted in the face of the latest positive corporate earnings in the market that are yet to impact much on prices of most equities, due to the seeming high yields in Treasury Bills and rising inflation. Institutional investors seem to be quiet in the market as revealed by the prevailing low volume of transactions. They have continued to digest these emerging numbers, but it looks like smart money is gradually starting to accumulate positions in those companies which scorecards beat expectation on the NGX as revealed by the recently released Hal year numbers.
Also, the market expects positive news, or policy statements from the government to support the sector or company performance, going into the future. Noteworthy also is the fact that some corporate results came below expectation, especially blue-chip companies and medium cap stocks that posted mixed and even disappointing numbers. As such, your stop-loss and exit strategies should guide you at a time like this, when PZ has notified the NGX of its delisting at the price of N21 per share, just as GSK, Courtville Business Solution, Oando and some others have announced their plans to do likewise before now, even as not progress has been made in that regard by many.
Market technicals for the week as revealed by sentiment reports indicated 65% buy position and 35% sell volume with money inflow reading 90.67, so the need for market players to navigate the market now that many stocks are fairly priced in the midst of mixed macroeconomic and corporate numbers. The market situation of low traded volume and uptrend in the face of technical pattern of markup phase and strong momentum signaling a continuation of trend or reversal. Even then, bargain hunters are taking advantage of volatility and the relatively low prices to position in fundamentally sound stocks, especially among the banks.
To navigate the Q3 market volatility and the rest of the year’s mixed outlook 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. 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 continued its oscillation, as it rebounded to trade at year high of $90.65 per barrel in the midst of output cut and weak global demand as rate direction remain unclear ahead of new wave of inflation. We note the rising geopolitical tensions and supply disruptions due to the Russia-Ukraine war that has lingered for more than a year now, 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 mixed performance in the week under review, as the NGX recorded three trading sessions of up market and two down session on selloffs and profit taking, amidst buying interests in blue chips companies. These supported the market to trade above the 2008 peaks on a low traded volume. as the market extended its three weeks of positive outing.
Trading opened for the week on a positive note, extending the previous gains as the index recorded 1.11% rise, which was sustained on Tuesday when it inched up by a marginal 0.08%, before shedding 0.07% by the midweek. On Thursday the index list a further 0.13% to profit taking, but rebounded on Friday after gaining 0.09% on the increased buying interest in banking stocks. This brought the week’s total gain to 0.91%, compared to the previous week’s 3.00% growth.
Consequently, the composite NGXASI gained 616.15bps, closing at 68,143.34bps from the previous week’s 67,527.19bps, representing 0.91% growth after touching an intra-week high of 68,457.06bps from its lows of 67,568.03bps. Similarly, market capitalisation rose by N815.50bn, also representing a 0.91% appreciation in value, closing at N37.3tr from opened value of N36.96tr.
Top advancers’ table for the week, was dominated by low and medium priced stocks, amidst buying sentiment and profit booking, as volatility continued. Also notable was accumulation of position in banking and consumer goods stocks, while investors and traders continued to navigate the changing economic fundamentals and trading environment. So far, market players are revealing the upside potentials and inherent value in some companies with strong earnings power and good volume patterns, asbinvestors await the release of more half year earnings reports, especially from the few with interim dividends. As such, we believe that buying into strong, fundamentally sound companies and high dividend payout stocks remain the way to go, however, price correction and higher dividend payout impacts positively on dividend yields.
Market breadth for the week was positive as gainers outpaced losers in the ratio of 52:35 on mixed sentiments of 65% and 35% sell volume. Money Flow Index is looking up at 90.67bps, from the previous week’s 90.57points, an indication that more funds entered into the market on a weekly time frame. The candlestick formation of the market’s index on a weekly time frame revealed an uptrend and markup phase, as money market yields and rates outlook remain mixed, while position taking in value stocks persisted, amidst the surging inflation rate.

NGXASI Weekly Chart
The NGX index’s action on the weekly chart revealed a breakout pattern of two psychological lines of 67,000 points and 68,000 bps as 67,457.58 point turn new support on a low traded volume to signal continuation or reversal in the midst of mixed sentiments, as the market remains strong in the face of increasing volatility. We note also that the index is trading above ‘T’ line, 50- and 200-day moving average. The candlestick formation, at the end of the week, showed buyers are in control, as market players digest financials and other factors to reposition their portfolios for end of Q3 end and beyond. The candlestick pattern indicates continuation of the trend, depending on market forces in the new week.

Mixed Sectoral Indices
Sectoral performance indexes were mixed, as the NGX Banking and Consumer Goods closed higher at 5.55% and 2.24% respectively, while NGX Insurance led the decliners after losing 2.94%, followed by Industrial goods and Energy with 0.49% and 0.12% respectively.
Transactions in volume and value were up as investors exchanged 2.64bn shares worth N45.45bn, compared to the previous week’s 2.51bn units valued at N32.82bn. Volume was driven by financial services, Oil/Gas and Consume goods industry. Specifically, volume was boosted by trading in shares of Oando, Fidelity Bank, UBA, FCMB and Nascon.
CWG and Tantalizers were the best-performing stocks, gaining 44.14% and 39.39% respectively, closing at N5.78 and N0.46 per share on market sentiment and forces. On the flip side, the share prices of Chellarms and Cornerstone Insurance lost 18.77% and 11.43% respectively at N2.90 and N1.24 per share, on back of profit taking,

Outlook for the week
We expect the mixed sentiments to continue on profit taking, earnings expectation and CPI , ahead of MPC meeting in the face of sector rotation and policy pronouncements. These are coming in the midst of, corporate actions, price adjustment and payment dates. However, retracement to the 65,578.12bps level and below is possible on profit-taking as global and domestic events unfold.

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