Positive Sentiment as Investors, Reposition Portfolios Ahead Of Q3 Earnings

Market Update for October 24

Nigeria’s stock market witnessed a rebound on Tuesday as market players digested recent macroeconomic data released by the economic managers, as well as the GTCO Q3 earnings reports that beat market expectation. The holding company grew its profit by 100%, offering an insight into what investors should expect from banking stocks this season. These impacted positively on the benchmark All-Share index lifting it higher and in the process halting the bearish transition on a less than average traded volume in the midst of positive market breadth and buying sentiment.
Already, the market is anticipating the release of more quarterly earnings reports from major blue chip companies ahead next week’s submission deadline. Also, buying interests has increased across some sectors which had pushed the index above the 67,000 points psychological line again, while staying within the consolidation range with improved positive momentum and high volatility that is associated with earnings reporting season and last quarter seasonality. Despite the oscillating volume pattern and the pullbacks witnessed so far, it had created buy opportunity for smart money which are gradually repositioning their portfolios amid rising inflation and high Monetary Policy Rate.
Also, the outlook for fixed income market yields remains mixed in the face of the ongoing decline recorded in the last two TB primary market auctions and bearish mode of the bond market.
On the strength of improvement seen in transaction volume, positive momentum and flow of funds into the equity space as revealed by the money flow index, investors and traders 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. Also, the market awaits positive catalysts in the form of policy statements from economic managers to boost confidence and perception, even with the ongoing decline in the fixed income market rates and yields amidst the rising inflation, which 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 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.
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Oil price oscillation continued, pulling back to trade at $87.78 per barrel in the midst of global economic concerns and hopes of containment in the middle east. Even when some nations are already looking the way of Venezuela which is also an OPEC member. 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 opened in the green and was sustained, despite oscillating on buying interest in banking, consumer stocks and others. This situation pushed the Index to an intraday high of 67,317.77bps from its lows of 66,876.92ps, before closing above its opening figure at 67,217.77bps.
Market technicals were positive and mixed 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 0.71 points, just as the impetus behind the day’s performance was relative strong, with Money Flow Index reading 75.99pts, from the previous day’s 63.65pts, indicating that funds entered the market.
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Index and Market Caps
The benchmark NGXASI, at the close of Tuesday gained 340.85bps, closing at 67,217.77bps, from its 66,876.92bps opening level, representing a 0.51% growth. Market capitalization also rose by N187bn, closing at N36.93tr, from the previous day’s N36.74tr, which also represented a 0.51% appreciation in value.
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Meanwhile, Tuesday’s upturn was driven by position taking in the shares of the Geregu, Flourmill, Dangote Sugar, Oando, GTCO, UBA, University Press and Chams, among others. This impacted positively on Year-To-Date gain which dropped to 31.15%, while Market Capitalization YTD gain stood at N8.86tr, representing a 32.74% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Insurance closed 0.46% lower, while NGX Banking led the advancers after gaining 1.44%, followed by Consumer goods with 0.54%. Just as NGX Industrial goods and Energy finished flat.
Market breadth was positive as gainers outnumbered losers in the ratio of 21:13, while activities in volume and value terms were up, after investors exchanged 319.90m shares worth N6.33bn, driven by trades in Accesscorp, GTCO, Fidelity Bank, UBA and SterlingNG.
Flour Mills and University Press were the best performing stocks, gaining 9.93% and 9.81% respectively, closing at N31.00 and N2.35per share respectively, on market forces and earnings expectation. On the flip side, VFD Group and ABC Transport lost 9.98% and 9.88% respectively, closing at N218.20 and N0.73per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect positive sentiment as institutional investors and bargain hunters reposition their portfolios ahead of more Q3 earnings reports in the face of sector rotation. Meanwhile, 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