NGX Rally Persists Amid Bargain Hunting, Surge In High Cap Stocks, Ahead Q3 Earnings, Inflation Data
Market Update for Week Ended October 10 and Outlook for October 13-17
The bull-run on the Nigerian Exchange continued for the fifth successive week amid accumulation in highly priced stocks and blue chip companies amid portfolio repositioning, profit taking and sector rotation ahead the September-end quarterly earnings reports. These, in addition to the consumer price index for the month are expected to reveal the true state of listed companies and the economy at large, aside pointing market direction.
Already, Geregu Power, an electricity generating company (GenCo) has presented its unaudited result, kicking off the earnings reporting season on the exchange, while at same time offering an insight into what the market should expect from that sector, on the back of the recent increase in power tariff which has marginally reflected on its bottom line during the quarter. Also, there are better days ahead of the sector following the recent approval of a N4 trillion debt refinancing plan to clear outstanding obligations to GenCos. Going by the plan, the government will issue federal bonds and treasury instruments to settle verified debts owed between 2015 and 2023, as part of improving cash flow, enabling them repay debts to gas suppliers, expand capacity and undertake maintenance of plants and machines.
As the earnings reporting season gets underway in earnest this week, the composite NGX All-Share index extended the previous week’s positive momentum, closing higher to set eyes on another monthly advance on the strength of the corporate numbers expected. This is also the impact of position taking during the season ahead of year-end seasaonality, knowing that Q3 numbers are very important because they offer insights into what to expect at the end of current financial year end in terms of likely payout after the share prices of many companies had hit new 52-week highs. This is especially true of companies that had beat their 2024 full-year performance by their 2025 half-year earnings reports judging by their earnings power that supports higher payout if the positive trend is sustained in their expected Q3 results. Looking at the index action and candlestick formation on a multiple time frame, the possibility of trend continuation or reversal is evident, depending on market forces in the new week.
All eyes are still on the changing market and economic fundamentals across the globe in the face of geopolitical tension, domestic economic recovery and heightening insecurity, as fiscal and monetary authorities shake hands is their bid to reposition the nation’s economy. This may have accounted for the prevailing stability in the foreign exchange market, just as external reserves continues to attract inflows locally and internationally. The rekindling confidence in the government and its reforms remains a plus for the stock market and the economy at large if the recovery and growth are sustain.
The NGX remains strong in its markup phase amid funds entering the market due to the circular flow of fund on the back of lower fixed income market yields and mixed sentiments. A better understanding of the big picture of the market and the consequences of our actions as market players would determine outcomes or returns ultimately.
As such, positioning in the right stocks, sectors and industry at the right time in this season of volalility, sentiment and seasonality for which the last quarter is known makes the difference.
Technically, the market is trending higher to form a cup in a weekly chart and inverse head and shoulder on a daily time frame, signalling a bullish in the face of waiting for a trigger or boost from companies finanicals, even as NGX index action is trading above T line on a weekly chart, 50 SMA and EMA for week under review. The possibility of continuation of trend is high in the new week depending on market forces as all eyes are September inflation report from NBS and quoted companies quarterly results. The sentiment report for the period revealed buying sentiment of 97% buy position and 3% sell volume, as MFI looked down slightly to reads 82.59 points which indicates that funds slowdown in the market for the period. The positive market internals for the week support buying sentiment despite the markdown of the interim dividend paying banks share price during the period under review. As portfolio rebalancing persisted, while bargain hunters took advantage of pullbacks to buy into fundamentally sound companies with high yield, strong earnings power and low valuation that revealed high upside potentials.
To navigate the rest of Q4 market volatility and its positive outlook profitably using fundamental and technical analyses to run, join Investdata’s Live Sessions at noon every Mondays, Wednesdays and Fridays. Also, get investdata’s 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 corrections and pullbacks to continue the accumulation phase. As volume of transaction witnessed within the week remain low, it is time to go shopping for undervalued stocks, sector rotation and the next insider dealing opportunity.
Oil prices for the week dip, trading at $66.05per barrel following the easing of geopolitical tensions after Gaza peace deal and OPEC plan to hike production in the midst of oscilating US inventory. As ongoing conflict in the middle East and war in Ukraine and Russia disrupting oil output in the face of major central banks of the world cutting rates to trigger economic expansion across the globe. The up and down movement of oil price has continues to drive volatility across different investment windows and inflation that is slowing down in mature economies.
Global stock markets witnessed a positive outing over the week, driven by rally in Tech stocks and Fed rate cut ahead of Q3 earnings season. Just as mixed macroeconomic numbers and political dynamics that comes with uncertainities continue to guide market sentiment in these mature market and economies. As the economic data indicates the continuation of rate cut by the Fed in the next policy meeting coming up in November. In the new week, the expected Eurozone consumer price index, ECB decision, corporate earnings reports and geopolitical politics will shape global equities market.
Movement Of NGXASI
The NGX had a bullish week, in the face of volatility and buying interest across the major sectors of the market, recording five sessions of up market to close higher on a low traded volume and positive market breadth in the face of positive sentiment during the period.
Trading for the week started on a positive note, extending the previous gains as the index closed 0.86% higher on Monday, a trend that was sustained on Tuesday when the market rose by 0.12%. The bull-run continued at midweek, Thursday and Friday , gaining 0.50%, 0.33% and 0.54% respectively. These brought the week’s total gain to 2.37%, compared to the 1.02% positive outing in the previous week.
Consequently, the composite NGX All-Share Index rose by 3,404.00 basis points, closing at 146,988.04bps, from previous week’s 143,584.04bps closing level, after touching an intra-week high of 147,107.19bps from a lows of 143,584.05bps. Market capitalisation rose by N2.16 trillion to close at N93.30tr, representing a 2.37% value gain. Despite price adjustment in the shares of UBA, Zenith Bank, Stanbic IBTC and GTCO, for their interim dividend of 25kobo, N1.25, N2.50 and N1.00 respectively.
The week’s advancers’ table was dominated by high cap and low priced stocks in the midst of buying sentiment and portfolio rebalancing ahead of more corporate earnings reports. Also notable was the fact that market players were taking advantage of the pullbacks to reposition their portfolios and carrying out sector rotation.
Market technicals for the period were positive and mixed as revealed by volume and market breadth, with gainers outnumbering losers in the ratio of 51:41 on a lower volume transacted in the face of buying sentiment as indicated by investdata sentiment report showing 97% ‘buy’ volume and 3% sell position. Money Flow Index was looking down to read 82.59points from the previous week’s 83.02 points, an indication that funds exited the market on a weekly time frame.
Technical View
The NGX index’s action extended its rally to a new all-time after breaking out 146,600.08 strong resistance to signal trend reversal or continuation, which needs confirmation in the new week, as all eyes are on more financial reports and, as well as consumer price index reports that are expected to hit the the market in the face of changing momentum and sentiment, especially from the companies in the consumer goods, industrial, banking, insurance, agribusiness, services, oil and gas sectors. Mixed sentiment hit some blue chip companies in the face of low valuation and high upside potential.
Bullish Sectoral Indices
The sectoral indexes for the week were up, save for NGX Banking that closed 0.41% lower, while the NGX’s Industrial goods led the advancers after gaining 4.23%% followed by Insurance, Energy and Consumer goods with 3.69%, 2.90% and 0.83% respectively.
Transactions in volume and value were lower during the week, as players exchanged 2.29bn shares worth N90.28bn, compared to previous week’s 8.40bn units valued at N115.50bn. Volume was driven by Financial Services, ICT industry and Agriculture industry, boosted specifically by Ellah Lakes, Chams, Fidelity Bank, Conerstone and UBA.
Sovereign Trust Insurance and Omatek were the best performing stocks during the week, gaining 16.73% and 12.30% respectively, closing at N3.21 and N1.37 per share on market forces and sentiment. On the flip side, Livingtrust Mortgage Bank and Neimeth Pharm lost 14.61% and 10.96% respectively, at N5.20 and N6.01 per share, on profit taking.
Outlook for the week
We expect the mixed sentiment to continue on bargain hunting and sector rotation. Also, expectation of more corporate earnings reports to hit the market in the face of portfolio rebalancing. As players take advantage of any pullbacks to buy into value stocks. As investors are watching with rapt attention.
However, retracement to the 143,585bps level and below is possible on correction as global and domestic events unfold.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
08028164085
