NGX Index Slips Again, Amid Caution, As Investors Await Policy Directions, Sept CPI, Q3 Earnings

Market Update for October 10

Trading volatility continued on the Nigerian Exchange Tuesday as the market recorded one day up and one down in the last six trading sessions to signal mixed sentiments and consolidation ahead of major events or activities that will give clear direction with all eyes on macroeconomic data and corporate earnings to ascertain the position of the economy. Already, the IMF and other organizations recently downgraded growth forecast of the Nigerian economy on the strength of low crude oil production, FX market problem, unclear policy direction of the fiscal and monetary authorities in the midst of increasing insecurity across the country, and geopolitical tension across the globe.
The benchmark NGX All-Share index closed the session lower, on a low traded volume and negative market breadth in the face of a bearish sentiment as uptrend remain intact. Market players continue to take advantage of the ongoing oscillation to reposition their portfolios as earnings reporting season draw closer. Also, the market is waiting for positive catalysts in the form of policy statements from economic managers to boost confidence and perception.
The increasing geopolitical tension will continue to drive global and domestic market volatility, so investors and traders anywhere in the world should factor in this uncertainty in their trading and investment plans always. The NGX index’s action still within its consolidation range to trade above the T-line. More companies continue to announce their closed period for Q3 financials which are expected to start pouring in, any moment from next week for early filers. The index’s action stayed flat after the previous session rebound.
Amidst raging concerns over macroeconomic headwinds in the country today, Q3 earnings expectation, mixed outlook in fixed income yields as bond market remain bearish, with the Naira crossing the N1,000/US Dollar threshold, rising inflation among others. Owing to the cautious environment pervading the nation’s equity market, it is important that you trade and invest wisely ahead of events and factors that will shape the market in this last quarter of this year. Despite the mixed sentiment witnessed so far, the market’s big uptrend remains intact at above the 50-Day Moving Average, despite testing it in the midst of a material shift in the index and the ongoing volatility.
Despite the ongoing oscillation or pullbacks on NGX, investors should trade consumer and industrial goods stocks with caution, while repositioning portfolios, targeting services industry stocks with strong fundamentals and earnings power capable of supporting price, and higher dividends payment at the end of the year.
These are against the backdrop of the changing market conditions and trading environment due to macroeconomic headwinds, mixed corporate earnings. Others are the prevailing mixed outlook for fixed income instruments yields and rates in the face of rising inflation, high interest rate and exchange rate challenges due to the high volatility in the exchange. However, candlestick formation at the end of the session signals a bearish pattern that supports downtrend, just as the 2008 resistance level turned another strong support level to watch.
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Oil price oscillation continued, as it inched up to trade at $87.88 per barrel in the midst of traders speculating impact of middle east conflict on supply disruption, stronger US Dollar and dovish comment of Fed, in the face of production cuts in some oil producing nations and inflation waves that may affect crude demand. The Russia-Ukraine war which has lingered for over a year 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.
Tuesday’s trading started marginally in the green but oscillated to pullback in the afternoon, on selloffs and profit taking across the low, medium and high cap stocks, a situation that pushed the Index to an intraday low of 66.956.31bps from its highs of 67,118.93ps, before closing slightly below its opening figure at 66,984.62bps.
Market technicals were negative and mixed with a lower volume traded, when compared to the previous session, in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 17% buy position and 83% sell volume. The total transaction volume index stood at 0.47 points, just as the energy behind the day’s performance was weak, with Money Flow Index reading 40.71pts, from the previous day’s 42.85pts, indicating that funds left the market.
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Index and Market Caps
The composite NGXASI, at the end of Tuesday trading slide by 116.71bps, closing at 66,984.62bps, from its 67,101.33bps opening level, representing a 0.17% drop. Market capitalization also fell by N64.12bn to N36.80tr, from the previous day’s N36.861tr, which also represented a 0.17% value loss.

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Meanwhile, Tuesday’s downturn was driven by selloffs and profit booking in Presco, Ecobank Transnational Incorporated, GTCO, Flour Mills, Unilever, Zenith Bank, Aiico, Wapic and Jaiz Bank, among others. This impacted mildly on Year-To-Date gain which slipped to 30.70%, while Market Capitalization YTD gain stood at N8.03tr, representing a 33.64% rise above its opening level for the year.

Bearish Sector Indices
Sectoral performance indexes were in red, as NGX Energy and Industrial goods closed flat, while NGX Banking led the decliners after losing 1.11%, followed by, Insurance and Consumer goods with 0.71% and 0.11% respectively.
Market breadth turned negative as losers outpaced gainers in the ratio of 27:13, while transaction in volume and value terms were mixed, after investors exchanged 257.42m shares worth N7.80bn, driven by trades in Fidelity Bank, Accesscorp, UBA, Oando and Zenith Bank.
Capital Hotel and Chams were the best performing stocks, gaining 9.82% and 9.38% respectively, closing at N3.02 and N1.40 per share respectively, on market forces and Q3 earnings expectation. On the flip side, John Holt and Presco lost 10% and 9.54%, closing at N1.44 and N182.00per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect mixed sentiments to continue on bargain hunting and portfolio repositioning ahead of September CPI and Q3 corporate earnings reports in the face of sector rotation, with all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.
However, pullbacks are creating ‘buy’ 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.

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