Q3 Earnings Season Window Dressing Drives NGXASI Above 40,000bp On Renewed Buying Interests
The gains recorded in the last two trading seasons of October made the NGX benchmark index recover from a seven-month oscillatory movement to breakout the strong resistance level of 39,875.66 basis points and psychological line of 40,000 on a huge volume that is sensible to support the rally. This strong rebound has wiped out the whole loss since February 24. 2021, that made a world of difference which again, is extremely bullish. These prove that the bulls are increasingly optimistic while more investors from the bear camp re-examine their positions and strategies.
As NGX index sustained upward movement on Thursday, a breakout of 40,367.31 and 40,572.31 resistance levels will turn the market into a positive position from a marginal YTD loss of 0,12%. That was an extremely strong resistance level that ushered in a new recovery move in the new month and quarter despite Treasury Bills rates inching up by 30 points at the last auction. What I would like to see is a strong follow-up in October which takes the NGX index straight above the next resistant levels of 40,367.33 like it doesn’t exist. After that, we should see a slight pullback on profit-taking in the first trading week of October before the real Q3 numbers start hitting the market as companies send notifications of their closed periods and board meeting dates to the exchange. The state of the expected earnings reports and level of liquidity in the equity space will propel another rally in the new month and quarter.
Investors should hold onto their high value and growth stock positions, even as the direction of the fixed income market yields and rates is still unclear since funds flow towards opportunities for higher returns.
Thursday trading opened slightly on the upside before pulling back on profit-taking in Nestle and retraced up in the early afternoon on position taking in Dangote Cement, Presco, Okomu Oil, VItafoam, NB, and others, which pushed the benchmark NGX index to an intraday high that broke out the 40,000 mark at 40,221.17bps, from its lows of 39,073.90bps, after which it closed significantly above the opening points at 40,221.90bps on a huge traded volume driven by cross deals in hospitality giant- Transcorp Hotel involving over 763m shares.
Market technicals were positive and strong as volume traded was higher than the previous day, in the midst of positive breadth and sentiments as revealed by Investdata’s Sentiment Report showing 100% ‘buy’ position. The total transaction volume index stood at 1.11 points, just as the momentum behind the day’s performance was relatively strong, with Money Flow Index looking up at 66.58points, from the previous day’s 60.76points, indicating that funds entered the market.
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Index and Market Caps
The key performance index NGXASI, at the end of Thursday trading, sustained it rally to gain 628.88 basis points and close at 40,221.17bps from an opening figure of 39,592.29bps, which represented 1.58% growth, just as market capitalization rose by N327.65bn, closing at N20.96 trillion, from the opening value of N20.63trillion, also representing 1.58% in value gain.
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The session’s upturn was driven by an accumulation of interests Dangote Cement, Presco, Okomu Oil, NB, Vitafoam, May/Baker, Lafarge Africa, UACN, United Capital, and Unilever, among others, which impacted positively on Year-To-Date loss as it dropped to 0.12%. This was just as the cumulative loss in market capitalization fell to N81.71bn, representing a 0.33% decline from the year’s opening value.
Bearish Sector Indices
Performance indexes across sectors were down, except for the NGX Industrial index that closed 4.08% higher, while the NGX Banking Index led the decliners, after losing 0.30%, followed by the Energy, Insurance and Consumer goods with 0.12%, 0.03%, and 0.03% loss respectively.
Market breadth was positive, after gainers outnumbered losers in the ratio of 20:14, while transactions in volume and value terms were up, with market players exchanging 1.05bn shares worth N7.42bn, compared to the previous day’s 474.37m units valued at N4.01bn. Volume was driven by trades in Transcorp Hotel, FBNH, Transcorp, GTCO, and Coronation Insurance.
University Press and Pharma-Deko were the best performing, gaining 9.82% and 9.81% to close at N1.23 and N2.35per share respectively on their low price attraction and expected Q3 earnings report. On the flip side, Chams lost 8.7%, while Mansard insurance which just returned from a share reconstruction exercise dropped 4.12%, closing at N0.21 and N2.33 p
Also, institutional investors and others continue to digest recently release economic data, the outcome of the Treasury bill auction were 91 and 182 days tenor rate remain unchanged and 364 days slightly up by 30points to 7.50% for a whole one year ahead of last quarter and year-end repositioning of portfolios. Also, investors are still observing the interplay of forces in the FX market as the CBN postpones the lunch of the new digital currency platform. The day’s high volume suggests that institutional investors and others are gradually taking position in the market, as they look 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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