Pullbacks Create Entry Opportunities, As Investors Realign Portfolios Amid Q3 Earnings Inflow

Market Update for October 25

Trading activities on the Nigerian Exchange at the midweek stayed mixed and bearish, halting previous gain, as profit taking hit financial services stocks and others that had rallied since the beginning of the week. Also, more impressive earnings report from the banking sector were made available to investors.
One of such was the Q3 numbers of Accesscorp which beat market expectation, confirming the impact of capacity building which has started to reflect on the holding company’s performance, as it doubled its profit level for the period. Scorecards from the consumer goods sector have so far revealed a mixed performance amidst soaring production cost and foreign currency headwinds. Unilever and Guinness Nigeria, however, seem to have recovered from their previous quarter loss positions, posting positive numbers at the end of September, thereby rekindling hope for a better year-end, while offering an insight, as investors digest the numbers, even as Nigerian Breweries remains in loss position in the last quarter as revealed by its results.
The pullback across the major sectors of the market due to profit booking weighed on the benchmark All-Share index as it closed marginally lower on an above average traded volume but positive market breadth, despite the seeming selling sentiment witnessed at the end of trading. Already, the candlestick formation has signaled reversal but needs to be confirm as the market opens on Thursday. The benchmark index still trades above the 67,000 points psychological line, while staying within the consolidation range with improved volume and high volatility associated with earnings reporting seasons and last quarter seasonality.
The slowdown and the oscillating pattern so far in the market have created buy opportunities for smart money which are gradually repositioning their portfolios amid rising inflation and high Monetary Policy Rate. Already, 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, as all eyes are on the next primary market auction date and rates. On the strength of improved 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 quarterly scorecards are expected.
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.
With economic challenges and headwinds in the nation today, and Q3 earnings expectations, there are other concerns such as the mixed outlook in fixed income yields as the bond market remains bearish, with the Naira crossing the N1,200/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, inching up to trade at $89.87 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 or cooking Inflation which we believe would be sustained 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 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.
Meanwhile, midweek’s trading started in the upside and oscillated before pulling back for the rest of the session on selloffs in banking, consumer stocks and others. This situation pushed the Index to an intraday low of 67,206.16bps from its highs of 67,383.60ps, before closing slightly below its opening figure at 67,206.16bps.
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 selling sentiments as revealed by Investdata’s Sentiments Report showing 0% buy position and 100% sell volume. The total transaction volume index stood at 0.74 points, just as the impetus behind the day’s performance was relative strong, with Money Flow Index reading 75.96pts, from the previous day’s 69.70pts, indicating that funds entered the market, despite sliding down.
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Index and Market Caps
At the end of Wednesday’s trading, the composite NGX All-Share Index slipped 11.61bps, closing at 67,206.16bps, from the 67,217.77bps opening level, representing a 0.02% drop. Market capitalization also fell slightly by N6.37bn, closing at N36.92tr, from the previous day’s N36.93tr, which also represented a 0.02% value loss.
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The downturn was driven by profit taking in shares of NB, Dangote Sugar, Oando, GTCO, UBA, Zenith Bank, Eterna and ChI Plc, among others, impacting mildly on Year-To-Date gain which dropped to 31.13%, while Market Capitalization YTD gain stood at N8.84tr, representing a 32.72% rise above its opening level for the year.

Bearish Sector Indices
Sectoral performance indexes were down, as NGX Banking led the decliners after shedding 1.09%, followed by Insurance, Energy, Consumer and Industrial goods with 0.62%, 0.24%, 0.16% and 0.10% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 23:18, while activities in volume and value terms were mixed, after players exchanged 329.66m shares worth N4.41bn, driven by trades in Fidelity Bank, Accesscorp, Chams, UBA, and GTCO.
Multiverse and Chams were the best performing stocks, gaining 9.74% and 9.71% respectively, closing at N2.93 and N1.92per share respectively, on market forces and Q3 numbers. On the flip side, Sunu Assurance and Etranzact lost 10% each, closing at N0.99 and N7.56per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect mixed sentiments as investors and bargain hunters continue to 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