Sentiments May Linger As Yields Drop, Ahead Of Sept CPI, Q3 Earnings

Market Update for October 11

Nigeria’s stock market at the midweek extended its one day up and one down movement for the seventh sessions, consolidating its oscillation on improved traded volume and buying sentiments ahead of September consumer price index and Q3 corporate earnings reports which would help investors ascertain the position of the economy. This has become necessary amidst of the recent downgrade of the economy by the IMF and other organizations, due to low crude oil production, FX market challenges, unclear policy direction by the fiscal and monetary authorities in the midst of increasing insecurity across the country, and the geopolitical tension across the globe.
The NGX All-Share index closed the session higher, halting the previous day’s loss on an above average traded volume and positive market breadth in the face of mixed momentum as the market uptrend remain intact. Market players continue to take advantage of the ongoing oscillation to reposition their portfolios as earnings reporting season draw closer. Also, the market awaits positive catalysts in the form of policy statements from economic managers to boost confidence and perception. Also, the lack of communication and policy direction of government is weighing on the investor confidence and market momentum
The increasing geopolitical tension will continue to drive global and domestic market volatility, so investors and traders anywhere in the world should factor in this uncertainty in their trading and investment plans always. The NGX index’s action still within its consolidation range to trade above the T-line. More companies continue to announce their closed period for Q3 financials which are expected to start pouring in, any moment from next week for early filers. The index’s action stayed flat after the previous session rebound.
Amidst raging concerns over macroeconomic headwinds in the country today, Q3 earnings expectation, mixed outlook in fixed income yields as bond market remain bearish, with the Naira crossing the N1,000/US Dollar threshold, 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 at above the 50-Day Moving Average, despite the material shift in the index and the ongoing volatility.
Notwithstanding the seeming rebound recorded on the NGX at the end midweek’s trading, investors should trade consumer and industrial goods stocks with caution, while repositioning portfolios, targeting services industry stocks with strong fundamentals and earnings power capable of supporting price, and higher dividends 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. Others are 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, the two consecutive decline in Treasury Bill primary market auction rates or yields may trigger more flow of funds into equity space, as all the tenor yields drop to 3.67%, 5.11% and 9.25% respectively for 91days, 182 days and 364 days. The candlestick formation at the end of the session signals a bearish top pattern that supports downtrend, but needs to confirm as the market opens today, just as the 2008 resistance level turned another strong support level to watch.
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Oil price oscillation continued, as it pulled back again to trade at $85.49 per barrel in the midst middle east conflict, fear of weak demand and supply cuts. Just as inflation waves that may affect crude demand. The Russia-Ukraine war which has lingered for over a year 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.
Meanwhile, Wednesday’s trading opened slightly in the upside, and it was sustained throughout the session, on position taking across the low, medium and high cap stocks. Despite the seeming selloffs, a situation that pushed the Index to an intraday high of 67,190.54bps from its lows of 66,981.09ps, before closing slightly above its opening figure at 67,100.49bps.
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 mixed sentiment as revealed by Investdata’s Sentiments Report showing 57% buy position and 43% sell volume. The total transaction volume index stood at 0.79 points, just as the energy behind the day’s performance was weak, with Money Flow Index reading 38.901pts, from the previous day’s 40.71pts, indicating that funds left the market. Despite the market close higher.
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Index and Market Caps
At the end of midweek’s trading, the key performance NGXASI inched up 115.62bps, closing at 67,100.49bps, from its 66,984.62bps opening level, representing a 0.17% up. Market capitalization also rose by N63.52bn to N36.86tr, from the previous day’s N36.801tr, which also represented a 0.17% value gain.
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The session upturn was driven by position taking in BUA Cement, and Dangote Cement, among others. This impacted mildly on Year-To-Date gain which inched up to 30.90%, while Market Capitalization YTD gain stood at N8.09tr, representing a 33.83% rise above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes were up, except NGX Banking that closed lower by 0.27%, while NGX Insurance led the advancers after gaining 1.58%, followed by, Industrial and Consumer goods with 0.95% and 0.01% respectively. Just as NGX Oil/Gas finished flat.
Market breadth turned marginally positive as gainers outnumbered losers in the ratio of 18:17, while transaction in volume and value terms were mixed, after investors exchanged 410.32m shares worth N4.46bn, driven by trades in Neimeth Pharm, Accesscorp, Zenith Bank, Fidelity Bank and UBA.
Thomas Watt and Daar Communication were the best performing stocks, gaining 9.81% and 9.52% respectively, closing at N2.35 and N0.23 per share respectively, on market forces and sentiment. On the flip side, Omatek and Oando lost 8.33% and 8.08%, closing at N0.44 and N9.10per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect mixed sentiments to continue on TB yields drop, bargain hunting and portfolio repositioning ahead of September CPI and Q3 corporate earnings reports in the face of sector rotation, with 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