With Eyes On Likely MPC Meeting Date, Investors Go For Sound Stocks, Ahead Of Q3 Earnings

Market Update for October 4
Midweek’s trading on the Nigerian Exchange was a mixed session, short-living the previous day’s gains on selling sentiments that hit highly priced stocks, pulling the benchmark NGX All-Share index lower on a very high traded volume and positive market breadth. This occurred in the face of buying interests in two major sectors of the market, while all eyes are on the Q3 earnings reporting season and the expected reconvening of Monetary Policy Committee meeting by the Central Bank of Nigeria (CBN), if only to give the economy a much-needed direction.
Market volatility continued as more companies announced their closed period on the exchange for Q3 financials expected to start pouring in any moment from next week for early filers. The index action retreated after the previous session’s rebound to form a top chart pattern that supports a reversal, even as it still trades within the consolidation range. However, this requires confirmation as trading opens Thursday.
Amidst concerns over macroeconomic headwinds in the country today, Q3 earnings reports are expected to remain mixed, due to the ongoing fiscal reforms by government, as well as the lingering foreign exchange market challenges with the Naira already crossing the N1,000/US Dollar threshold. 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 the final 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 testing it in the midst of material shift of the index and the ongoing volatility.
The pullback witnessed at the end of Wednesday’s trading creates bargain opportunities in the market, but 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 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 inched to trade at $86.36 per barrel after polling back below $90 in the midst of recession fear, stronger US dollar, substantial shale oil supply and more hawkish central banks moves, in the face of production cuts in some oil producing nations and inflation waves that may affect crude 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.
Meanwhile, Wednesday’s trading started in the upside and oscillated before pulling back by afternoon on selloffs in high and medium cap stocks, a situation that pushed the Index to an intraday low of 66,449.30bps from its highs of 66,891ps, before closing below its opening figure at 66,482.28bps.
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 sentiment as revealed by Investdata’s Sentiments Report showing 7% buy position and 93% sell volume. The total transaction volume index stood at 1.25 points, just as the energy behind the day’s performance was weak, with Money Flow Index reading 43.42pts, from the previous day’s 43.47pts, indicating that funds left the market marginally.
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Index and Market Caps
At the close of midweek’s trading, the composite NGXASI shed 288.69bps, closing at 66,482.28bps, from its 66,770.97bps opening level, representing a 0.43% decline. Market capitalization also fell by N158.01bn to N36.38tr, from the previous day’s N36.54tr, which also represented a 0.43% depreciation in value.

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Meanwhile, the downturn was driven by profit taking and selloffs in MTNN, Lafarge, FBNH, Fidelity Bank, Wema Bank, NGXGroup, Fidson and Nahco, among others. This impacted negatively on Year-To-Date gain, reducing it to 29.72%, while Market Capitalization YTD gain stood at N7.64tr, representing a 31.51% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Insurance and Consumer Goods closed higher by 0.28% and 0.18% respectively, while NGX Banking led the decliners after sliding by 0.02%, followed by, Industrial goods with 0.01%. Just as NGX Energy finished flat.
Market breadth turned positive as gainers outpaced losers in the ratio of 29:21, while activities in volume and value terms rose, after stockbrokers traded 657.52m shares worth N4.60bn, driven by trades in Universal Insurance, Fidelity Bank, CHI Plc, GTCO and Wema Bank.
Oando and Redstar Express were the best performing stocks, gaining 9.88% and 9.81% respectively, closing at N9.45 and N2.91 per share respectively, on the activities of market forces and sentiments. On the flip side, Wema Bank and Ikeja Hotel lost 10% each, closing at N4.23 and N3.15per share, purely on the back of profit taking.

Market Outlook
We expect mixed sentiment to continue on bargain hunting and portfolio repositioning ahead of Q3 corporate earnings reports in the face of sector rotation, with all eyes are on the reconvening of monetary policy meeting by CBN.
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

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