Profit Taking, Portfolio Rebalancing Ahead, As Weaker October PMI Tapers Q3 Earnings Outlook

Market Update for November 1

Position taking and positive momentum on the Nigerian Exchange continued as trading opened for the month of November in the face of better-than-expected Q3 corporate earnings reports and low valuation of many stocks. The NGX All-Share index action broke out the new all-time high of 70,000 in the history of the Nigerian equity market on a strong buying interests in large cap stocks and blue chip companies.
Wednesday’s session was a clear reflection of the high confidence in the nation’s equity market with funds continuously flowing in that direction amid a seeming stampede among investors seeking to hedge against soaring inflation in the country. These is on the strength of impressive earnings by listed companies that would likely support a higher payout at the end of the 2023 financial year in the midst of continued government borrowings, raging insecurity and unabating macroeconomic headwinds.
The fact that November has started on a positive sentiment, extending the previous month’s bull transition has pushed the market higher while investors digest the impressive earnings and yields outlook in the fixed income space. Trade metrics revealed a very high traded volume and positive market breadth as the composite index closed in the green.
Historically, Investdata research shows that trading in the month of November has always been mixed, closing positive six times, according to an analysis of our 10-year market data.
It is also quite interesting to note that putting together all the six months of the year, the best six months’ window on the nation’s stock market performance is between November and April.
The stock market being a leading economic indicator, is already pointing to where the economy is heading, considering the robust corporate earnings of listed companies representing different sectors of the economy that were just made available to the exchange to guide investors decision and investment plan.
Meanwhile, the October Purchasing Managers’ Index released on Wednesday showed a marginal contraction amidst other economic data that continue to confirm rising macroeconomic headwinds. According to a report by Stanbic IBTC research, the level of manufacturing activities in the country fell to 49.10 points from 51.10 points in September.
On the strength of these weak indices, the World Bank had revised Nigeria’s GDP growth projection down on the strength of the increasing economic headwinds in the domestic and global environment. This was despite the seemingly positive outlook on oil prices and geopolitical tension across the globe in the face of cooling inflation and rates pause environment.
The buying pressure witnessed at the end of trading has been revealed by the candlestick formation. Continuation or reversal needs to be confirmed after forming what we call three soldiers in chart reading as the market opens this morning. The benchmark index trades above the 70,000 points psychological line and T line to remain in a markup phase on a high volatility that associates with earnings reporting seasons and last quarter seasonality.
To navigate the rest of the quarter and year profitably using fundamental and technical analysis, join investdata’s live sessions at noon every trading day “and also get investdata 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 mixed trend and volume pattern, it is time to shop for undervalued stocks, sector rotation, go for defensive stocks at the next insider playing opportunity.
Oil price oscillation continued, trading at $85.49 per barrel in the midst of cautious trading and fundamentals supporting higher prices in the face of middle east conflict, coupled with supply cuts. However, cooking Inflation outlook remain mixed on the back of geopolitical tensions across the globe today, at a time the Russia-Ukraine war entered its second year, and remains a major concern, aside the prevailing rates pause by some central banks. The supply tightened due to the Russia-Ukraine will drive up and down movement in oil price, which also drive market volatility across the globe.
Midweek trading opened in the upside and was sustained throughout the session on buying interests across some major sectors on the strength of earnings and others. This situation pushed the Index to an intraday high of 70,581.76bps from its lows of 69,222.13ps, before closing sharply above its opening figure at 70,581.76bps.
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 sentiments as revealed by Investdata’s Sentiments Report showing 100% buy position and 0% sell volume. The total transaction volume index stood at 1.45 points, just as the impetus behind the day’s performance was strong, with Money Flow Index reading 72.74pts, from the previous day’s 70.47pts, indicating that funds entered the market.
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Index and Market Caps
At the end of day trading the benchmark NGX All-Share Index gained 1,345.57bps, closing at 70,581.76bps, from the 69,236.19bps opening level, representing a 1.94% growth. Market capitalization also rose by N739.26bn, closing at N38.78tr, from the previous day’s N38.04tr, which also represented a 1.94% value gain.
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Meanwhile, the upturn was driven by accumulation and buying interests in shares of Airtel, FBNH, Cadbury, UBA, Accesscorp, GTCO, Presco, Zenith Bank, Flour Mills, NEM and Mansard, among others, impacting positively on Year-To-Date gain which jumped to 37.72%, while Market Capitalization YTD gain stood at N10.68tr, representing a 38.91% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, save for NGX Energy that closed lower by 0.14%, while NGX Insurance led the advancers after gaining 3.73%, followed by Banking with 2.21%, while NDX Industrial goods and Energy finished flat.
Market breadth was positive as gainers outnumbered losers in the ratio of 37:15, while activities in volume and value terms were up, after players exchanged 601.73m shares worth N11.02bn, driven by trades in UBA, FBNH, GTCO, Accesscorp and Universal Insurance.
Airtel Africa and Chams were the best performing stocks, gaining 10% and 9.91% respectively, closing at N1694.10 and N2.44per share respectively, on market sentiment and strong earnings. On the flip side, Caverton and Champion Breweries lost 7.74% and 6.85%, closing at N1.43 and N3.40per share, purely on the back of profit booking.

Market Outlook
We expect mixed sentiments on profit taking and portfolio rebalancing on the strength of better than expected corporate numbers released so far, in the face of sector rotation and weak manufacturing PMI for October. Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.

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CRO|Investdata Consulting Ltd
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