Nigeria Bourse Rebounds, As Pullbacks Create New Opportunities, Early Filers Restore Confidence

Market Update for October   17

Nigeria’s stock market on Tuesday witnessed a positive outing, wiping out the previous session’s losses on increased buying interest in financial stocks, among others. These pushed the benchmark NGX All-Share index higher on an above average traded volume and positive market breadth.
As portfolio rebalancing continues on the strength of the latest inflation report for September that hit 18-year high at 26.72%, even as the 2023Q3 earnings reporting season kicked off with impressive numbers from United Capital and Infinity Trust Mortgage Bank. Both companies grew their top and bottom lines, thereby sustaining the growth seen in their previous quarters, signaling a high possibility of juicier dividend payout at the end of the current financial year. Also, more earnings reports are expected to hit the market before weekend and even going into the coming weeks.
On strength of the seeming improved volume of transactions and positive momentum at the end of Tuesday’s trading, market players should continue to take advantage of the ongoing oscillation and pullbacks in some major sectors of the market to reposition their portfolios as more scorecards are expected in the market. Also, the market awaits positive catalysts in the form of policy statements from economic managers to boost confidence and perception, even as the ongoing decline in the fixed income market rates and yields in the midst rising inflation, has gradually triggered flow of funds into the equity space, as revealed by money flow index, ahead of more Q3 financials.  
The ongoing geopolitical tension will continue to drive global and domestic market volatility, so investors and traders anywhere in the world should factor in this uncertainty to their trading and investment plans always. The NGX index’s action still trades above the T-line and 50 DMA, as more company’s board meeting dates draw closer for approval Q3 numbers. The index’s action stayed within the consolidation range as it retraced up. 
Amid the raging concerns over macroeconomic headwinds in the country today, Q3 earnings expectation, there are other concerns such as the mixed outlook in fixed income yields as the bond market remains bearish, with the Naira crossing the N1,000/US Dollar threshold, and 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, in the midst of a material shift in the index and the ongoing volatility. 
Despite the up and down movement witnessed on the NGX as the earnings season kicked off, we expect that investors would 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. The candlestick formation at the end of the session signals a bearish top pattern that supports downtrend, but needs to confirm as the market opens today, just as the 2008 resistance level turned another strong support level to watch.
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Oil price oscillation continued, rebounded to trade at $91.42 per barrel in the midst of escalating middle east crisis, even when world leaders are moving to contain the situation. There is, however, the soaring Inflation which we believe would be sustained on the back of the due geopolitical tensions, at a time the Russia-Ukraine war entered its second year, and remains a major concern, aside the prevailing high interest rate regime. Also, supply tightened due to the Russia-Ukraine This up and down movement in oil price, has continued to drive volatility across markets.
Tuesday’s trading started on the upside and was sustained throughout the session on position taking across the low, medium and high cap stocks, a situation that pushed the Index to an intraday high of 67,326.12bps from its lows of 67.037.21ps, before closing above its opening figure at 67,326.12bps.
Market technicals were positive and strong with a higher volume traded, when compared to the previous session, in the midst of breadth favoring the bulls on a buying pressure as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 0.78 points, just as the momentum behind the day’s performance was relative strong, with Money Flow Index reading 54.61pts, from the previous day’s 46.32pts, indicating that funds entered the market.  
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Index and Market Caps
At the end of the day’s trading, the composite index NGXASI, gained 288.19bps, closing at 67,326.12bps, from its 67,037.93bps opening level, representing a 0.43% growth. Market capitalization also rose by N158.33bn, closing at N36.99tr, from the previous day’s N36.831tr, which also represented a 0.43% appreciation in value.   
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Meanwhile, Tuesday’s upturn was fueled by position taking in the shares of Julius Berger, Accesscorp, Danagote Sugar, Nascon, UBA, Zenith Bank, GTCO, Wapco and Aiico, among others. This impacted positively on Year-To-Date gain which inched up to 31.37%, while Market Capitalization YTD gain stood at N8.89tr, representing a 33.33% rise above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes were in green, save for NGX Consumer goods that closed flat, while NGX Banking led the advancers after gaining 2.75%, followed by Insurance, Industrial goods and Energy with 0.20%, 0.05% and 0.03% respectively.  
Market breadth turned positive as gainers outnumbered losers in the ratio of 26:22, while transaction in volume and value terms were up, after stockbrokers crossed 377.97m shares worth N5.17bn, driven by trades in Etranzact, UBA, Accesscorp, Fidelity Bank and SterlingNG.
Julius Berger and CWG were the best performing stocks, gaining 10% and 9.83% respectively, closing at N36.30 and N9.50per share respectively, on market forces and earnings expectation. On the flip side, Multiverse and Unity Bank lost 9.49% and 0.00% respectively, closing at N2.67 and N0.91per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect mixed sentiments to continue on reaction to latest CPI of 26.72%, earnings released on Tuesday, bargain hunting and portfolio repositioning ahead of more Q3 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