Q3 Window Dressing: Mixed Sentiments Yet, Amidst Bargain Hunting, Portfolio Reshuffling

Market Update for September 25

The bearish outing on the Nigerian Exchange continued Monday, the first trading session of the week, as the benchmark index closed in the red due to selloffs in highly priced stocks and blue chip companies. The index traded within the consolidation range, and at the same time in a decline phase, but on a low traded volume that revealed the weak state of the market at this key levels. It is no news that window dressing is underway due to end of the quarter rebalancing of portfolios by fund managers and others.
It is also obvious that, the market is looking to the new management team of the apex bank to hit the ground running, after Tuesday’s screening by the Nigerian Senate for confirmation. The first major task of the CBN Governor and his four deputies will be to address issues of monetary policy that would give direction as to where the nation’s economy is headed. Investors and Nigerians have consistently expressed worry over the country’s economy at a time foreign exchange, inflation and monetary policy rates are hitting the roof, resulting in economic contraction. This is visible in the seemingly fragile growth recorded so far in the face of insecurity, businesses shutting down and low purchasing power of Nigerians.
In all these, all eyes are on the Q3 earnings reporting season that draws closer with mixed expectations, due to the ongoing fiscal reforms by government, as well as foreign exchange market challenges that have persisted with the Naira already crossing the N1,000/US Dollar threshold. The pullbacks and correction on the nation’s equity market signals cautious trading, following which it is important that you trade and invest wisely ahead of events and factors that will shape the market in the final quarter of this year. Despite the mixed sentiment witnessed so far, the market’s big uptrend remains intact to trade above the 50-Day moving average in the midst of material shift of the index and the ongoing volatility.
Notwithstanding the market’s pullback and bargain opportunities, investors should trade consumer and industrial goods with caution while repositioning their portfolios, the targeting services industry stocks with strong fundamentals and earnings power capable of supporting price and higher dividend payment at the end of the year. These are against the backdrop of the changing market conditions and trading environment due to macroeconomic headwinds, mixed corporate earnings and the prevailing mixed outlook for fixed income instruments yields and rates in the face of rising inflation, high interest rate and exchange rate challenges due to the high volatility in the exchange. However, candlestick formation at the end of the session signals a bearish pattern that supports downtrend, just as the 2008 resistance level turned another strong support level to watch.
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 selloffs. Despite the mixed volume pattern witnessed in recent days, it is time to shop for undervalued stocks, sector rotation, go for defensive stocks at the next insider playing opportunity.
Oil price oscillation continued, as it pulled back to trade at $92.88 per barrel in the midst of production cuts by oil producers and booming US oil production, in the face of new rate waves and weak demand. The Russia-Ukraine war remains a major concern, the prevailing high interest rate regime and slowing inflation. Also, supply tightened due to the Russia-Ukraine conflict that entered the second year. This up and down movement in oil price, has continued to drive volatility across markets.
Monday’s trading opened in the downside, and was sustained for the rest of the session, on profit taking and selloffs in banking, telecom and consumer goods stocks, a situation that pushed the Index to an intraday low of 66,882.64bps from its highs of 67,281.98bps, before closing below its opening figure at 66,882.64bps.
Market metrics were negative and mixed with a lower volume traded when compared to the previous session in the midst of breadth favoring the bears on a selling pressure as revealed by Investdata’s Sentiments Report showing 0% buy position and 100% sell volume. The total transaction volume index stood at 0.79 points, just as the impetus behind the day’s performance was weak, with Money Flow Index reading 46.92pts, from the previous day’s 52.56pts, indicating that funds left the market.
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Index and Market Caps
The key performance NGXASI, at the end of Monday, shed 441.95bps, to close at 66,882.64bps, from its 67,324.59bps opening level, representing a 0.66% decline. Market capitalization also fell by N242bn to N36.61tr, from the previous day’s N36.85tr, which also represented a 0.66% depreciations in value.
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Meanwhile, Monday’s downturn was driven by profit taking and selloffs in MTNN, Oando, Dangote Sugar, Accesscorp, Zenith Bank and Fidelity Bank, among others. This impacted negatively on Year-To-Date gain which reduced to 30.50%, while Market Capitalization YTD gain stood at N8.08tr, representing a 32.33% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as NGX Banking and Consumer goods closed lower by 3.18% and 0.14% respectively, while NGX Insurance led the advancers after gaining 0.18%, followed by, Industrial goods with 0.11%. Just as NGX Energy finished flat.
Market breadth was negative with losers outnumbering gainers in the ratio of 36:15, while activities in volume and value were mixed after investors exchanged 408.19m shares worth N5.44bn, driven by trades in Accesscorp, UBA, Unity Bank, Universal Insurance and Transcorp.
Ikeja Hotel and John Holt were the best performing stocks, gaining 10% and 9.70%, respectively, closing at N2.75 and N1.81 per share respectively, on market forces and sentiments. On the flip side, Caverton and Accesscorp lost 9.87% and 9.86% respectively, closing at N1.37 and N15.55 per share, purely on the back of profit taking and selloffs.

Market Outlook
We expect mixed sentiments to linger on bargain hunting and portfolio reshuffling for quarter end window dressing in the face of sector rotation.
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.

Theme Thriving In A Changing Macroeconomic Climate: Identifying Opportunities, Waves & Paths On NGX
1. Navigating Market Dynamics: Insights For Profitable Strategies- Alhaji Garba Kurfi, MD/CEO APT Securities & Funds Ltd)
2. Mastering Market Volatility: Chart & Analysis For Higher Returns- Mr Abdul-Rasheed Oshoma Momoh, Head Capital Market at, TRW Stockbrokers Ltd
3. The Power of Macroeconomic Data In Equities’ Trading & Investing- Mr Olatunde Amolegbe, MD/CEO, Arthur Steven Asset Management Ltd
4. Understanding The Link Between Fundamental, Technical and Sentiment Analyses In Picking Stocks- Mr Ambrose Omordion, CRO, Investdata Consulting Ltd.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605