Expect Mixed Sentiment, Amid Sector Rotation, Positioning In Blue Chips, Ahead Of 2024 Dividend Season

Market Update for November 23

The seesaw movement on the Nigerian Exchange continued Thursday, with the benchmark NGX All-Share index rebounded, closing marginally higher while halting the previous session’s losses on increased buying interest and positive momentum that pushed the market back to green on a very high traded volume and positive market breadth. Trade metrics for the day and in recent times reveal the increased position taking in low priced stocks which had continually dominated the gainers and activities charts lately.
As market players digest the latest yields from the TB auction, portfolio reshuffling and rebalancing ahead of year-end and dividend season continued, as all eye are on the forthcoming Santa- Claus rally, year-end window dressing and the 2023 audited full-year earnings reporting season which kicks offs in January 2024. Already, the the unaudited 2023Q3 earnings reports have offered a glimpse into the expected Santa Claus rally.
Specifically, the earnings reports presented through the exchange offered an insight into the high possibility of dividend growth at the end of this current financial year, especially among companies in the service sectors whose earnings yield and Earnings Per Share support higher payout ratios at the end of the day. Owing to a myriad of challenges so far, however, manufacturing companies , especially may struggle to pay dividends commensurate to their current market price.
The divergence between the index’s action and momentum indicators signals the onset of correction or a continuation of trend that needs to be confirmed as the NGX index is still ranging and consolidating to trade above the T-Line and 71,000 mark, as it rebounded from the previous session’s level. Traders need to watch out as the market consolidates at this level of distribution phase amidst the high volatility. The stock market remains the quickest way to hedge against the rising inflationary pressure in the system today. So, this pullback or correction will create another entry opportunity for discerning market players, while investors interpret the outcome of the latest TB auction to give further insights into the flow of funds in the financial market.
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Oil price oscillation continued, as it trades $81.35 per barrel in the midst of Venezuelan output rise and threat to vital oil shipping lane escalated in the face rate pause by some of the central banks as inflation reports continue to cool off. The ongoing Middle East conflict and ceasefire continues to influence demand and supply meanwhile, worsened by the geopolitical tensions rising across the globe at a time the Russia-Ukraine war gradually approaches its third year. The war remains a major cause for concern with much more at stake than previously thought. The supply tightening due to the Russia-Ukraine war will propel the up and down movement in oil price, which also drive market volatility across the globe.
Thursday’s trading opened slightly in the green and was sustained throughout the session, despite oscillating on position taking in blue chip companies and others, while profit booking hit some stocks, a situation that pushed the Index to an intraday high of 71,055.28bps from its lows of 70,990.01bps, before closing slightly above its opening level at 71,050.87bps.
Market technicals were positive and strong with a higher volume traded, when compared to the previous session, in the midst of breadth favoring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 93% buy position and 7% sell volume. The total transaction volume index stood at 1.41 points, just as the momentum behind the day’s performance was strong, with Money Flow Index looking up to read 75.13pts, from the previous day’s 67.97pts, indicating that funds entered the market.
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Index and Market Caps
The benchmark NGXASI closed up 48.87 basis points up on Thursday at 71,050.87bps, from the 71,004.95bps opening level, representing a 0.07% up. Market capitalization rose by N26.87bn, closing at N39.07tr, from the previous day’s N39.05tr, which also represented a 0.07% value gain.
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Meanwhile, the upturn was driven by accumulation in the shares of Bata Glass, Oando, GTCO, Zenith Bank, Neimeth Pharm, Aiico, Multiverse, Enamelware and Unity Bank among others. This impacted mildly on Year-To-Date gain, which rise to 38.63%, while Market Capitalization YTD gain stood at N10.94tr, representing a 39.98% rise above its opening level for the year.

Bullish Sector Indices
Sectoral performance indexes closed higher, save NGX Consumer Goods index that finished lower by 0.05%, while NGX Insurance led the advancers after gaining 1.27%, followed by Industrial goods and Banking with 0.04% and 0.03% respectively.
Market breadth was positive as gainers outnumbered losers in the ratio of 33:18, while activities in volume and value terms were mixed, after players exchanged 563.71m shares worth N3.44bn, driven by trades in Universal Insurance, Verita Kapital, Unity Bank, Chams and Zenith Bank.
Beta Glass and Multiverse were the best performing stocks, gaining 10% and 9.98% respectively, closing at N59.40 and N5.29per share respectively, on market sentiment and forces. On the flip side, Ellah Lakes and Omatek lost 9.89% and 9.17%, closing at N3.37 and N0.99 per share, purely on the back of selloffs and profit taking.

Market Outlook
Being the last trading day of the week, we expect mixed sentiment to continue on profit taking and positioning in blue chip companies stocks, in the midst of sector rotation on the strength of the better-than-expected corporate numbers released and high yields, as 2024 is setting off with dividend season ahead.
Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.

Take Action

Invest 2024 Traders & Investors Summit
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4. Real Estate Investment Opportunities in the Hyper-Inflationary Environment Of Today
5. Understanding Commodity Markets For Profitable Portfolio Diversification in 2024
6. NGX ETFs Products As Investment Alternatives In 2024
7. Manging Investment & Trading Risks: Using Technical Analysis/Indicators
8. Trading With Numbers & Dates: 10 Golden Stocks For 2024

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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605