Market Update for October 27
It was still a mixed and volatile session on the Nigerian Exchange Limited at the midweek, as the composite index NGX All-Share Index caved into selling pressure and profit-taking on a low traded volume that possibly signaled a dearth of supply which can lead to markup by smart money, considering the positive market breadth and bullish sectorial indexes at the peak of earnings season.
Profit booking from stocks that had rallied earlier on positive market reaction to their corporate earnings reports had calmed market momentum at midweek which resulted in mixed sentiment as third-quarter earnings momentum continued to rise, thereby pushing most major indexes higher. Also, some stocks broke out their minor and major resistance levels on improved traded volume to reveal buyers’ interests in these companies’ share prices.
The NGX index action pullback or shedding of the previous day’s gains were due to mixed earnings reports, profit-taking, and players waiting to see the primary auction rates of Treasury Bills during the session as the market is yet to react to the impressive earnings from Livestock Feeds, Transcorp, BOC Gases, and Honeywell Flour Mills. The anticipation of more earnings and the positive state of the ones released so far have given investors hope for continued growth in the economy despite the impact of the foreign exchange market crisis that reflected on the last quarter-to-quarter performance.
Technically, the NGX index’s action took a pause to reveal the presence of profit-takers, even as the strength behind the uptrend waxes stronger as indicated in the ADX reading 48.44 as against the previous day 45.55 which is above 20 points and money flow index at 73.88 points on a daily chart. The possibility of correction after, or during this peak of earnings season is high, with the expectation of more quarterly earnings hitting the market. The candlestick formation as the market side-trended, signaling the level of indecision among investors as volume traded suffered a decline.
However, the state of these corporate earnings and level of liquidity in the equity space will determine how far this pullback will go, with all eyes on oil prices at the international markets, currently trading above $85 per barrel, despite the seeming oscillation at the international market, as the direction of yields in the fixed income market remains unclear.
Midweek’s trading started slightly on the downside, which was sustained throughout the session, despite oscillating on profit booking and position taking, a situation that pushed the NGX index to an intraday low of 41,766.41 basis points, from its highs of 41,814.94bps, before closing below its opening level at 41,789.59bps.
Market technicals were mixed as the volume traded was lower than the previous day’s in the midst of breadth favouring the bulls on a mixed sentiment as revealed by Investdata’s Sentiment Report showing 48% ‘buy’ position and 52% sell volume. The total transaction volume index stood at 0.78 points, just as the impetus behind the day’s performance was strong, as Money Flow Index dropped to 73.88 points, from the previous day’s 78.87 points, indicating that funds left the market.
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Index and Mkt Cap Movement
At the end of Wednesday trading, the key performance index shed 25.53 basis points and closed at 41,789.59bps after opening at 41,814.94bps, representing a 0.06% drop, just as market capitalization shed N12.88bn, closing at N21.81tr, from the opening value of N21.82tr, also representing 0.06% value loss.
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The session’s downturn was driven by selloffs and profit booking in stocks like, Nestle Nigeria, FBNH, GSK, PZ Cusson, Custodian Investment, International Breweries, Unilever Nigeria, UBA, Transcorp Hotel, and UPDC, among others. This impacted mildly on Year-To-Date gain that reduced to 3.77%. Market capitalization stood at N751.67bn YTD, representing a 3.57% growth from the year’s opening value.
Bullish Sector Indices
Performance indexes across sectors closed higher, except for the NGX Consumer Goods index that closed flat, while the NGX Oil/Gas led the advancers after gaining 1.70%, followed by Insurance, Banking, and Industrial Goods with 1.54%, 0.51%, and 0.05% respectively.
Market breadth was positive, as gainers outnumbered losers in the ratio of 23:15, while activities in volume and value terms were down, as stockbrokers traded 284.60m shares worth N3.20bn, compared to the previous day’s 353.23m units valued at N5.57bn. Volume was boosted by trades in FBNH, AIICO, Ecobank Transnational Incorporated, Transcorp, and Fidelity Bank.
AIICO Insurance and University Press were the best-performing stocks after gaining 9.37% and 9.09% to close at N1.03 and N1.80 per share respectively on the bonus of 12-for-9 shares and market forces. On the flip side, GSK and Transcorp Hotel lost 10% and 9.88% respectively, closing at N6.30 and N5.38 per share purely on the weak Q3 earnings performance.
Market Outlook
We expect a mixed trend as players adjust their portfolios while reacting to positive numbers, just as more earnings are expected to hit the market on Thursday. Also, the candlestick formation and volume traded at the end of midweek trading revealed indecision as institutional players are not selling yet. It is equally noteworthy that any pullback at this level is for the accumulation of more positions ahead of year-end seasonality. Also, many stocks are trading within their buy ranges, a situation expected to attract more funds into the equity space, given the Dividend Yield capable of serving as a hedge against inflation.
Also, institutional investors and others continue to digest recently release economic data, the outcome of the Treasury bill auction was 91 and 182 days tenor rate remained unchanged and 364 days slightly down by 25 points to 7.25% for a whole one year ahead of earnings season portfolios repositioning. Also, investors are still observing the interplay of forces in the FX market as the CBN’s new digital currency platform. The day’s low volume suggests that institutional investors are not making a sell move yet in the market, as they look at the economic data and policy direction of the economic managers. It is noteworthy that oil price rebounded in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner for companies like Total, Seplat, Okomu Oil, Presco, Lafarge Africa, and others.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
ambrose.o@investdataonline.com
Tel: 08028164085, 08179547605
