Dividend Investing, Reactions To Q1 Earnings Continue, Amid Portfolio Realignments On Pullbacks

Market Update for April 29

The bear dominance on the Nigerian Exchange continued on Monday, with the month of April set to wipe out the previous months’ gains, following selloffs and profit taking that had characterized the market since the first trading session. This is despite the earnings season and corporate actions expected to support the market, as the correction waves persisted on the back of the higher yields seen in the fixed income market. This has been due to the prevailing high interest rates in the face of rising inflation and declining productivity. Even so, all eyes are on the expected Q1 GDP reports from Nigeria’s National Bureau of Statistics.

The continued downtrend is a reflection of the change in market fundamentals and dynamics that calls for a corresponding change in strategies to navigate the market to preserve capital and profit from the new trend and waves. It is evident that investors are positioning on low valuation and mixed macroeconomic data for dividend income ahead of more Q1 earnings reports and payment dates.

The NGX All-Share index closed lower on a low traded volume in the midst positive market breadth and selling sentiment ahead of dividend qualification dates while income investors are taking advantage of pullbacks to buy into value. Also, traders are looking forward to more Q1 numbers to reposition their portfolio, ahead of Q2 numbers, as they continued to read market sentiment and digest the scorecards released so far.

That notwithstanding, the down and ranging market, the reversal signal continue to create new entry opportunities for market players, given the oversold state of the market and mixed technical position as revealed by the bottom chart pattern at the end of Monday’s session which supports uptrend. Already, traders and investors are looking forward to Q1 numbers as a game changer and unfolding happenings in the economy to further guide their investment decisions.

As April winds down, more companies made available their first quarter earnings reports to the market. The numbers were mixed as some company’s performance beat expectations, while others are disappointing.  The companies that posted impressive numbers are Nahco, Total Energies, UACN, Okomu Oil, IMG, May/Baker and others.  The earnings reports from Seplat, Wapco, Etranzact, Meyer, Beta Glass, BUA Cement and others were, however, mixed, looking at their top and bottom lines.

The NGX index’s action continued to trade below the T-line and 50-Day Moving Average, confirming the weak momentum while extending the decline phase, as the index witnessed another dip on a low average traded volume and positive market internals to stay below the 8-day moving average exponential and 50 DMA to confirm continuation or reversal of trend depending on market forces and liquidity level. Market players are also looking at corporate actions to position for dividend income. Although, we see fiscal and monetary policies trying to return the nation’s economy to the path of recovery, even with the continued mismatch of policies and implementation style. As declining oil production in the last months is a minus to the nation reserve.

More companies on the exchange continued to notify the investing public of their AGM meetings. The latest came from Transcorp, Transcorp power, Nigerian Breweries and others, while Airtel Africa updates the market of its share buyback. Just as Ucap and The Initiates informed the market of its insiders dealing. Therefore, investors should target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings which price feeds on in any market cycle.

Technically, there is a mixed signal on the NGX that support reversal and continuation of trend, which needs to be confirmed as trading opens this day. The market still remain weak on the selling sentiment as revealed by candlesticks formation and momentum indicators. The NGX is somewhat now, with the ADX looking up at 39.64, while RSI and Money Flow Index are mixed to read 27.86 and 13.57 points against the previous session 28.75 and 13.11 points respectively.  Market players should watch this current trend and trade with caution after the index had signaled reversal in the face of funds leaving the market in a decline phase. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and selloffs in the face of others position.

To navigate the rest of the quarter and beyond profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Monday, Wednesday and Friday 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 range market. Despite the oscillating volume of transaction witnessed in recent time, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.

Oil price on Monday pulled back, as it continues its oscillation to trade at $88.39 per barrel in the midst of increasing ceasefire talks between Israel and Hamas in Cairo and mixed outlook of US Fed policy meeting on rate, as investors looks to the state of global economies in the face of cooling tension in Middle East and mixed macroeconomic data from matured economies.   Geopolitical tension across the globe remained a major threat to many economies and the commodity market and other factors that impact oil price as it continued to rally. This trend may likely continue in 2024, this up and down movement that drive volatility. As middle East conflict and war in Ukraine last.

Meanwhile, Monday’s trading opened slightly in the green before pulling back to oscillate for the rest of the session on profit taking in some stocks and buying interest in others. This situation pushed the NGX’s index to an intraday low of 97,836.54bps from its highs of 98,311.09bps, before closing below its opening figure at 97,879.94bps.

Market technicals for the session were mixed and weak, as volume was higher 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 26% buy position and 74% sell volume. The total transaction volume index stood at 0.65 points, just as energy behind the day’s performance was weak as Money Flow Index inched up to read 13.57pts, from the previous day’s 13.11pts, indicating that funds entered the market, despite closing  in the red.

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Index and Market Caps

At the end of Monday’s trading, the benchmark NGX All-Share Index shed 190.67bps to 97,879.94bps after opening at 98,152.91bps, representing a 0.28% decline, just as market capitalization fell by N154.25bn, closing at N55.36tr from the previous day’s N55.51tr, which also represented a 0.28% value loss.

Attention: If you have not signed up for INVESTDATA’s buy and sell signal setup, don’t delay, because the number of stocks entering their oversold range has increased as market correction and pullbacks call for caution and positive chart patterns to be on our watchlist. These stocks have potentials to retrace, considering their earnings prospects and the oscillating moves in an upmarket and weak economy.

To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling, and repositioning as we await an economic reform policy that can stimulate and re-track the economy to the path of growth and development.

The downturn was driven by profit taking and selloffs in the shares of Dangote Sugar, CAP, GTCO, Zenith Bank and NB among others. This impacted negatively on Year-To-Date gain which reduced to 30.90%. Market capitalization YTD gain stood at N11.21tr, representing 35.12% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were down, led by  NGX Consumer goods after losing 0.79%, followed by Insurance, Banking, Industrial goods and Energy with 0.70%,0.41%, 0.02% and 0.02% respectively.

Market breadth turned positive as gainers  outnumbered losers  in the ratio of 25:19, while transactions in volume and value were slightly up  after investors exchanged 277.24m shares worth N5.10bn. Volume was driven by trades in  UBA, Transcorp, Accesscorp, Zenith Bank  and FBNH.

SterlingNG and FBNH were the best performing stocks, gaining 9.95% and 9.83% closing at N4.20 and N22.35 per share respectively on market forces and earnings expectations. On the flip side, Dangote Sugar and NSL Tech lost 10% each, closing at N43.20 and N0.54per share, purely on selloffs.

Market Outlook

We expect mixed sentiments to continue in the face of dividend investing and reaction to Q1 numbers as Insurance corporate earnings are expected with dividend announcements, while taking advantage of pullbacks to position and rebalancing portfolio.

This is amid the volatility and pullbacks that add more strength to upside potential. 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