Market Update September 29
Equity prices on the Nigerian Exchange bounce back at the midweek after selloffs and profit booking among the sectors and different classes of stocks increased ‘buy’ interests in the market ahead of quarter-end window dressing and the Q3 earnings reporting season now around the corner.
The session’s sharp rebound, halted two consecutive days of pullbacks on a very high traded volume and positive breadth, recovering from losses the market suffered since August 20 and the three different levels of sideways movement.
The rise in transaction volume, during the recent sessions, despite the mixed sentiments, were an indication that investors are gradually returning to the market after studying the latest macroeconomic data and happenings in the fixed income market which direction is unclear, ahead of Q4 activities and seasonality. Also, liquidity is seemingly returning to the stock market, coinciding with the current oil price oscillation that has taken crude to $80 per barrel in the international market, thereby supporting market fundamentals.
As we said at the beginning of the year, the Nigerian equity market is likely to close positive, even if not at the same magnitude as we saw last year. Also, it is becoming clear now that September will close up, in line at historical data and investing pattern at this time, or period of the year, helped by the turnaround we saw on Wednesday, a trend we expect will continue on Thursday, the last trading session of the month/quarter. We note that the NGX index action has broken out its multiple resistance levels, which is not surprising, being in line with our projection, gaining 733 points on improved traded volume and positive sentiment that should take away panic as we have always said.
Investors should hold onto their high value and growth stock positions, even as the direction in the fixed income market yields and rates is still not clear, since funds flow to where there are higher returns.
Meanwhile, midweek’s trading started slightly on the upside and oscillated till midday before rebounding on position taking in high priced stocks, pushing the composite index to an intraday high that broke out the 39,000 psychological line at 39,592.29bps, from its lows of 38,854.32bps, after which it closed significantly above the opening points at 39,592.52bps.
Market technicals were positive and mixed as volume traded was lower than the previous day, in the midst of breadth favouring the bulls on a high buying pressure as revealed by Investdata’s Sentiment Report showing 100% ‘buy’ volume. The total transaction volume index stood at 1.89 points, just as the momentum behind the day’s performance was relatively strong, with Money Flow Index looking up at 60.76points, from previous day’s 48.59points, indicating that some funds entered the market.
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Index and Market Caps
At the end of midweek’s trading, the NGX All-Share Index rallied 733 basis points to close at 39,592.29bps from an opening figure of 38,858.99bps, which represented 1.89% growth, just as market capitalization rose by N382.06bn, closing at N20.63, from the opening value of N20.25trillion, also representing 1.89% appreciation in value.
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Midweek’s upturn was due to demand for blue chips – Dangote Cement, Nestle, Presco, FBNH, GTCO, UBA, Zenith Bank, Access Bank, NNFM, as well as UACN, United Capital, Unilever, and Africa Prudential, among others, which impacted positively on Year-To-Date loss that dropped to 1.68%. This was just as the cumulative loss in market capitalization fell to N409.36bn, representing a 1.91% decline from the year’s opening value.
Mixed Sector Indices
Performance indexes across sectors were mixed, with the NGX Insurance and Energy index closing 2.02% and 0.20% down respectively, while the NGX Industrial Goods Index led the advancers, after gaining 3.57%, followed by the Consumer Goods and Banking with 3.13% and 0.89% respectively.
Market breadth was positive, after gainers outnumbered losers in the ratio of 24:14, while activities in volume and value terms were mixed with stockbrokers trading 474.37m shares worth N4.01bn, compared to the previous day’s 526.3m units valued at N3.04bn. Volume was driven by trades in FBNH, Universal Insurance, Mansard Insurance, Zenith Bank and Fidelity Bank.
NNFM and FBNH were the best performing, gaining 6.88% and 6.62% to close at N8.55 and N8.06 per share respectively on earnings expectations and market forces. On the flip side, Julius Berger and Mansard insurance lost 10% apiece, closing at N24.30 and N2.43 per share purely on profit-taking and selloff.
Market Outlook
We expect a continuation of trend after index action had formed a strong bullish engulfing on quarter-end window dressing, oil price trading above $75, and Q3 earnings expectation, just as investors and traders take advantage of pullback to position ahead of the earnings reporting season. Also noteworthy is the fact that many stocks are trading within their buy ranges, a situation expected to attract 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 ahead of the month and quarter-end, as well as the continued repositioning of portfolios for the year’s last quarter. Also, investors are still observing the interplay of forces in the FX market as the CBN gives a guideline for the new digital currency platform. The day’s low volume suggests that institutional investors and others are still cautiously looking at the economic data and policy direction of the economic managers. It is noteworthy that oil price pullback in the international market; corporate actions, as well as the interim dividend possibilities, are around the corner.
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