NGSE Index In Marginal Gains, As Investors Digest Influx Of Earnings Reports

Market Update for October 30
Over 30 companies made available their quarterly scorecards to the investing public at the midweek’s trading session to trigger buying interest on the Nigerian Stock Exchange (NSE), especially as stocks with notable earnings and surprising performance have become the toast of investors positioning for year-end and dividend income.
Despite the continued volatility and mixed trades during the session, the benchmark All-Share index halted the previous bear-run to close positive on a low volume for supply test, as market players traded cautiously on the strength of financials released, further revealing the undervalued state of quoted companies even when the numbers are mixed. The changing capital formation and flow of funds in the economy will soon influence the market positively as productivity improved to support the system.
At the end of the two-day Fed monetary policy meeting, rates were cut again in line with the market’s expectations. Remember, just 10 months ago, the Feds made the ninth rate hike in three years, to defend quantitative tightening which they said was on “autopilot.” Since then, they have stopped QE, cut rates three times, and started expanding the balance sheet with an eye on buying almost half-a-trillion dollars’ worth of Treasury Bills by the second quarter of next year. The good news on US rate cut is that global asset prices will go up as history has shown us, inflow to emerging markets and economies will increase, especially where there are grossly under-priced assets by looking at price to earnings situation of any market.
Midweek’s trading started out on a slightly upside movement in the morning and fluctuated to sustain a positive trend throughout the session, touching an intraday high of 26,385.37 basis points, from its low of 26,199.51bps. It finally closed the day above its opening point at 26,310.77points on a low traded volume.
Market technicals for the day were positive and mixed as volume traded was lower than the previous day’s in the midst of negative breadth and mixed sentiments, as revealed by Investdata’s sentiment reports showing a ‘sell’ volume of 40% and buy’ position of 60%. The transaction volume index for the day stood at 0.70, while momentum behind the day’s performance remained weak, despite Money Flow Index moved up significantly to read 29.50 points, from the previous session’s 23.05bps, an indication that funds entered some stocks and the market.

Index and Market Cap
At the end of midweek’s trading, the NSE All-Share index gained 66.28bps to close at 26,310.77bps from its opening point of 26,244.39bps, which represented a 0.25% growth, just as market capitalization was up by N32.31bn, closing at N12.81tr, from an opening value of N12.79tr, which also presented a 0.25% value gain.
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The day’s upturn was driven by the seeming buying position in stocks like Dangote Cement, UACN, MTN Nigeria, Access Bank and FCMB Holdings, which impacted slightly on the NSE’s Year-to-Date loss, reducing it to 16.29%, while market capitalization gain stood at N1.13tr, representing a 9.67% improvement over the year’s opening level of N11.72tr.

Bearish Sector Indices
The sectoral performance indexes were largely bearish, except for the NSE Banking that closed up by 0.11%, while the NSE Industrial Goods index led the decliners, losing 0.66%, followed by NSE Consumer goods index that lost 0.32% and NSE Oil/Gas that closed flat.
Market breadth turned negative as decliners outnumbered advancers in the ratio of 11:8; Just as market activities were down as volume and value by 47.7% and 38.46% respectively, as investors traded 156.85m share worth N1.81bn from the previous day 267.5m valued at N2.77bn. Volume was boosted by transactions in Multiverse, Sterling Bank, Access Bank. Zenith Bank and Guaranty Trust Bank.
University Press and Law Union were the best-performing stocks, topping the advancers table, after gaining 10% and 8.89% respectively to close at N1.21 and N0.49 each, on earnings release and market forces. On the flip side, Afrormedia and Flour Mills lost 9.76% and 98% respectively, closing at N0.34 and N14.00 on profit booking.

Market Outlook
We expect the losing momentum to diminish, as the market reacts to seemingly impressive numbers released on Wednesday, in expectation of more quarterly earnings reports ahead of month-end portfolio alignments, especially as the NSE’s new lows offer investors opportunities to position for short and medium-to-long-term views. This is given that earnings and economic news can change trend at any time, keep your gaze on fundamentally sound and dividend-paying stocks for possible capital appreciation as Q3 numbers giving insight into companies’ position and future expectations.
Also, traders and investors need to change their trading strategies due to the review of the NSE’s pricing methodology, now that all class of equities need uniform 100,000 units to effect any price changes. This may be part of efforts to mitigate the persistent price decline that has seen many stocks trading at between their five and ten-year lows and even more, in recent times.
Discerning investors should latch onto this, meanwhile, as a way of averaging down and recouping their investment immediately a recovery stage sets in, helped by economic policies, when things start to change gradually. In the process, equity prices will be influenced positively, while investors watch for sectors like insurance, banking, Industrial Goods, services, as well as oil/gas that have become defensive in recent times and could go bullish in no distant time.
Furthermore, we note that all eyes are on the newly appointed economic advisory team to settle down quickly and begin churning out policies capable of turning things around.

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