Expect Mixed Sentiment On Dividend Expectations, Quarter-End Window Dressing
Market Update for March 29
Nigeria’s stock market rebounded midweek ahead of the quarter-end window dressing on the back of an increased buying interest as profit-taking slowed down on the focus shifting to corporate earnings and the post-election realities. We also note the inflow of dividend declarations, rising yields in the fixed income market and expected macroeconomic data.
The positive market breadth continued across some major sectors on a less than average traded volume that halted the four consecutive sessions of losses on buying sentiments signaling the return of strength to the market, despite price adjustments for dividends. This is especially as the long awaited 2022 audited financials from first-tier banks and others had started rolling in, offering the market some stability ahead of the Q2 portfolio reshuffling.
Despite market rebound at the midweek, the NGX index is still trading below its 50-Day Simple Moving Average and EMA to creates opportunity for technical traders, as March 31 deadline for submission of the December year-end earnings reports is less than 48 hours. There is also 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, Transcorp released its mixed full-year audited reports, which came below the market expectation, despite the seeming growth in dividend payout of 5 kobo, as against the two kobo in the previous year, while McNichols announced a dividend of one kobo per share for its shareholders. 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 however the uncertainty of a rate crash by the incoming government to drive the economy, just as a policy shift may be a plus for the equities on a likely financial market and economic reset.
Despite the ongoing extreme volatility and positive sentiment, the market remains below the T-line, even as attention is shifting to corporate earnings, due to the increasing number of companies announcing their board meeting dates to approve audited results and recommend dividend. Also, the unaudited accounts published earlier have given investors an insight into what will likely be offered as dividend. Just as Q1 closed period notification continued on the exchange.
Technically, the NGX has signaled a reversal at this level supports an uptrend if the coming financials, especially from first-tier banks beat expectations, after the market had rallied for four months as revealed by price actions, an indication of a bearish divergence between the index action and MACD on a dally chart that supports a correction. Let us keep our gaze on market forces to confirm the next move, even as money flow is looking down.
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Oil price oscillation continued, rebounding to trade at $78.28 per barrel on US crude oil inventories fall in the midst of global banks recovering from recent shock of collops and continued rate hikes. Also, higher demand as China economic recovery expand. The 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.
Midweek’s trading opened sharply on the upside and it was sustained for the rest of the session, despite oscillating on position taking and pockets of selloffs, a situation that pushed the NGXASI to an intraday high of 53,667.05 basis points from its lows of 53,124.16ps, before closing above its opening figure at 53,603.80bps.
Market technicals were positive and strong with higher transaction volume, compared to the previous session in the midst of breadth favouring the bulls on a buying sentiment as revealed by Investdata’s Sentiments Report showing 88% buy position and 12% sell volume. The total transaction volume index stood at 1.16 points, just as momentum behind the day’s performance was weak going by Money Flow Index at 17.76pts, from the previous day’s 26.50pts, indicating that funds left the market, despite closing higher.
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Index and Market Caps
At the end of the day’s trading, the NGX All Share Index gained 252.50 basis points, to close at 53,603.80bps from the 53,498.27bps it opened, representing a 0.90% decline, just as market capitalization rose by N261bn to close at N29.20tr, from the previous day’s N29.14tr, which also represented a 0.90% value gain.
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The upturn was driven by buying interests in Dangote Cement, Zenith Bank, GTCO, Lafarge Africa, FBNH, PZ, Accesscorp and Trancorp among others, which impacted positively on Year-To-Date gain which reduce to 4.59%. Market capitalization YTD gain stood at N1.40tr, representing 4.61% above its opening level for the year.
Bullish Sector Indices
Sectorial performance indexes were mixed, save for NGX Insurance that closed lower by 0.76%, while NGX Industrial goods led the advancers after gaining 2.69%, followed by Banking and Consumer goods with 1.97% and 0,12% respectively.
Market breadth was positive as gainers outpaced losers in the ratio of 22:14, while transactions in volume and value were up after investors exchanged 236.075m shares worth N3.26bn, with volume driven by trades in Transcotp, Zenith Bank, GTCO, UBA and Sterling Bank.
Caverton and Ikeja Hotel were the best performing stocks for the day after gaining 8.08% and 7.77%, closing at N1.07 and N1.11 per share respectively, on market forces. On the flip side, May/Baker and CHI Plc lost 8.70% and 8.06% respectively, closing at N4.20 and N0.57per share, purely on profit taking.
We expect improved sentiments and mixed trend as players analyze recent earnings that hit market, ahead of more earnings reports in the midst of expected quarter end window dressing and price adjustment for dividend. 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.
Q2 2023 Investdata Master Class
Theme: Post-Election Investment Opportunities For Consistent Profits In 2023
1. Nigeria: Post-Election Investment Opportunities In Sectors/Industries, Mr Abiola Rasaq, Head Corporate Strategy at CSCS Plc
2. Managing Trade & Investment Risks In A Post-Election Year Using Technical Analysis Tools, Mr Abdul-Rasheed Oshoma Momoh, Head Capital Market at, TRW Stockbrokers Ltd
3. How To Prepare Ahead Of Policy Shifts By Incoming Administration, Alhaji Garba Kurfi MD/CEO APT Securities & Funds Ltd
4. Identifying Changing Post-Election Trends/Patterns For Enhanced Trading Returns, , Mr Ambrose Omordion, CRO. Investdata Consulting Ltd.
This volatile market is not going away any time soon. We have not seen many times like this, since our democratic government started in 1999, especially as the general elections and the post-COVID 19 era have changed the market’s holding structure with domestic investors taking the lead, a situation that has supported today’s trends and patterns. So it is more important than ever to have the best tools and knowledge to benefit most out of this cycle, as the post-election environment once again creates opportunities for money-making moves. That is why I am excited to share something New and Unique in the Q2 Master Class.
Expected Takeaways From This Q2 Master Class
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H. 5 Stocks to beat inflation in 2023
“Q2 Master Class 2023 connects you to post-election trade opportunities and ideas to enhance your trading profits
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Date: April 1, 2023
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