Mixed Sentiments Still, As Investors Digest Recent Macroeconomic Data, Earnings, Amidst Price Adjustments
Market Update for April 3
The nation’s equity market started the first trading week of April and second quarter of the year 2023 on a bearish note, as a result of selling pressure in some blue-chip stocks, especially those of banks that had released their 2023 full-year earnings reports. This was also true of those yet to make their numbers available to the market, as the deadline for submission closed on March 31, 2023.
Market players continue reacting to mixed corporate earnings and payouts on Monday amid the rush to submit audited financials ahead of the deadline as witnessed last week, a situation that extended the bear-run for a second consecutive session on a less than average traded volume and negative market breadth.
The Purchasing Managers’ Index, a macroeconomic data that measures productivity or business activities within the economy for the month of March as released by Stanbic IBTC Group came below market expectations, with a contraction worse at 42.3 points, when compared to the 44.7 points recorded in the previous month. This is the telling effects of the cash crunch witnessed across the country, which started easing as banks began redistribution of the Naira to ease the pain of the people.
There was also the effects of the inflow of more long awaited 2022 audited financials from first-tier banks that started rolling in, offering the market some stability in the Q2 portfolio repositioning.
The recent market pullback slowed down, as the NGX index traded slightly above 50-Day Simple Moving Average and EMA, thereby creating opportunities for technical traders and discerning investors to take position as recent markdown stocks had rebounded on prevailing undervalue of these companies, as portfolio rebalancing and positioning for Q2 trading on the strength of expected 2023 Q1 earnings reports, even when it seems likely to be mixed numbers for Q1 as a result of low economic activities due to cash crouch.
Meanwhile, Nahco released impressive full-year audited reports which came above market expectation, with a dividend of N1.20, while Total Energies, Mansard and NEM Insurance announced final dividend of N21, 36 kobo and 30 kobo respectively for approval by their shareholders at their next annual general meetings.
The prevailing dividend yields and low market price to earnings ratio provides better opportunities for discerning investors to hedge against inflation even when fixed income market yields look mixed. There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as a policy shift may be a plus for equities on a likely financial market and economic reset. Market volatility remains at the extreme on selling sentiment as T-line stay flat ahead of the next market forces, due to the increasing number of companies announcing their board meeting dates to approve Q1 2023 numbers.
Technically, the NGX remains at the distribution phase, a situation that supports an uptrend or correction as players digest the latest financials, especially from first-tier banks and others which are mixed. This is an indication of a bearish divergence between the index action and momentum on a dally chart that supports rally. Let us keep our gaze on market forces to confirm the next move, as money flow weak remain relatively but looking up.
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Oil price oscillation continued, as it rebounded sharply on sudden production cut by OPEC, as crude trade at $85.58 per barrel in the midst of weak economic activities as reveal by US latest PMI and that of China economic. Just as attack on Ukraine is rising even while China is calling for peace and a ceasefire. This geopolitical tension, the prevailing high interest rate regime and soaring inflation across the globe remain potent threat to world peace. Also, supply tightened due to the Russia-Ukraine war that entered into it is first year last week. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, Monday’s trading opened slightly in the downside and was sustained for the rest of the trading session on increasing selling interest in blue chip stocks and others, a situation that pushed the NGXASI to an intraday low of 54,186.51 basis points from its highs of 54, 236.59ps, before closing slightly its opening figure at 54,190.28bps.
Market technicals were negative and mixed with lower transaction volume, compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 8% buy position and 92% sell volume. The total transaction volume index stood at 1.18 points, just as momentum behind the day’s performance was weak going by Money Flow Index at 36.68pts, from the previous day’s 37.40pts, indicating that funds left the market.
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Index and Market Caps
At the end Monday’s session, the benchmark NGX All Share Index slipped by 42.06 basis points, closing at 54,190.28bps from the 54,232.34bps it opened, representing a 0.08% drop, just as market capitalization fell by N26.2bn to close at N29.52tr, from the previous day’s N29.54tr, which also represented a 0.08% value loss.
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Monday’s downturn was driven by profit taking in the shares ETI, Zenith Bank, GTCO, UACN, Champion, FBNH, Eterna, International Brew and Champion among others, which impacted mildly on Year-To-Date gain which reduce to 5.73%. Market capitalization YTD gain stood at N1.61tr, representing 5.75% above its opening level for the year.
Bearish Sector Indices
Sectorial performance indexes were down, save for NGX Insurance that closed 0.30% higher, while NGX Energy led the decliners after losing 0.32%, followed by Consumer goods and Banking with 0.31% and 0,26% respectively. Just as NGX Industrial goods closed flat.
Market breadth was negative as losers outpaced gainers in the ratio of 22:17, while activities in volume and value fell after investors exchanged 292.56m shares worth N2.38bn, with volume driven by trades in Fidelity Bank, Transcotp, UBA, Accescorp and Oando.
Lasaco and Mansard Insurance were the best performing stocks for the day after gaining 10% closing at N1.21 and N2.09 per share respectively, on high payout. On the flip side, SOCA and UACN lost 10% and 9.95% respectively, closing at N0.90 and N8.60per share, purely on selloffs profit taking.
Market Outlook
We expect mixed sentiments as players digest recent macroeconomic data and earnings, ahead of more earnings reports in the midst of price adjustment for dividend and Q2 positioning. We note that income investors continue to target dividend paying and defensive stocks to protect their portfolios post-dividend adjustments. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
Ambrose Omordion
CRO|Investdata Consulting Ltd
info@investdata.com.ng
ambrose.o@investdataonline.com
ambroseconsultants@yahoo.com
Tel: 08028164085, 08179547605
