Mixed Trend Ahead, As Investors Reposition On Pullback, Seek Value Stocks

Market Update for November 2

The seesaw movement on the Nigerian Exchange resurfaced Tuesday as the market witnessed another mixed and volatile session to reverse Monday’s negative outing on a positive outturn and buying interests in equities that recently suffered losses on profit-taking despite their impressive corporate earnings.

The mixed sentiment and prevailing low traded volume in the market reflect the declining momentum and the presence of sellers as institutional investors, fund managers, and others take time to analyze and digest the corporate earnings released so far in the just concluded earnings reporting season, amid portfolio rebalancing and repositioning which will impact positively or negatively on some stocks.

Technically, the NGX index’s action remains strong in the face of the up and down movements, profit-booking, and low transaction volume, as revealed by momentum indicators like ADX at 54.26 points against the previous day 52.83, and money flow index of 71.73 points on a daily chart. The possibility of a rebound is high after market players finished digesting the recent earnings released to the market. We note that the numbers came largely better than expected.

However, these strong earnings, interim corporate actions, and level of liquidity in the equity space will determine the extent of this market rally when it rebounds from this pullback. Already too, all eyes are on oil prices at the international markets, which is currently trading above $84 per barrel; besides the impact of the seeming oscillation at the international market, as the direction of yields in the fixed income market remains unclear.

Tuesday’s trading started slightly on the upside and it was sustained throughout the session despite oscillating on buying interests in some high and low cap stocks in the midst of profit-taking. This pushed the key performance index to an intraday high of 42,151.04 basis points, from its lows of 41,969.42bps, which closed thereafter above its opening level at 42,013.39bps.

Market technicals for the session were mixed and weak with volume traded lower than the previous day’s in the midst of negative breadth and selling sentiment as revealed by Investdata’s Sentiment Report showing 76% sell volume and 24% buy position. The total transaction volume index stood at 0.82 points, just as the impetus behind the day’s performance remains strong, Money Flow Index dropped to 71.73 points, from Friday’s 72.70 points, indicating that funds left the market.

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Index and Mkt Cap Movement

The benchmark NGX All-Share index, at the end of the day’s trading, gained a marginal 36.50 basis points, closing at 42.013.39bps after opening at 41,976.79bps, representing a 0.09% up, just as market capitalization rose by N19.11bn, closing at N21.93tr, from the opening value of N21.91tr, also representing 0.09% appreciation in value.

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Meanwhile, Tuesday’s upturn was driven by position taking in BUA Cement, Oando, International Breweries, and Dangote Sugar, among others, which impacted mildly on Year-To-Date gain, at 4.33%. Market capitalization stood at N780.78bn YTD, representing a 4.10% growth from the year’s opening value.

Mixed Sector Indices

Sectorial performance indexes were mixed, as the NGX Banking and Insurance indexes closed 1.51% and 1.49% lower respectively, while the NGX Industrial Goods index led the advancers after gaining 1.09%, followed by Oil/Gas and Consumer Goods with 0.72% and 0.57% respectively.

Market breadth was negative, as losers outnumbered gainers in the ratio of 31:10, while activities in volume and value terms were down, as investors exchanged 318.91m shares worth N3.28bn, compared to the previous day’s 378.15m units valued at N3.24bn. Volume was boosted by trades in UBA, FBNH, Zenith Bank, Chams, and Transcorp.

International Breweries and Lasaco were the best-performing stocks after gaining 9.62% and 9.33%, closing at N5.70 and N1.17 per share respectively on market sentiments and forces. On the flip side, UACN and FTN Cocoa lost 9.73% and 8.10% respectively, closing at N10.20 and N0.42 per share purely on profit-taking and selloffs.

Market Outlook

We expect a mixed trend as bargain hunters take advantage of correction to reload their portfolios with value stocks on the strength of positive numbers, just as candlestick formation and volume traded at the end of day trading revealed sideway trending as institutional players are not selling yet. It is equally noteworthy that this pullback at this level is for the accumulation of more positions ahead of year-end seasonality. Also, many stocks are trading within their buy ranges, a situation expected to attract more funds into the equity space, given the Dividend Yield capable of serving as a hedge against inflation.

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