Growth, Yields May Drive Investor Sentiments, Amidst Earnings Inflow, Quarter-end Window Dressing

Market Update for March 27
The negative sentiment on the Nigerian Exchange deepened on Monday to start the week on a bearish note, as selloffs and profit booking in the telecoms giants, aided by other highly priced stocks that weighed on the benchmark NGX All-Share Index that closed lower on a low traded volume. Market breathe was negative, thereby extending its bear transition to three consecutive sessions.
The trading activities confirmed the market decline after it had broken down the 50-Day Simple Moving Average and EMA on a selling pressure in the midst of long awaited corporate earnings and dividend announcement, which is expected to support the market in the short run depending on the state of the numbers. The situation was made worse by price adjustments for dividends in some stocks, making them attractive for traders. This was especially true of companies with strong earnings power and positive sector potentials, as the March 31 deadline for submission of December year-end earnings reports draws even closer. There is also the quarter-end window dressing and positioning for Q2 trading on the strength of expected 2023 Q1 earnings reports, even when it seems likely to be a numbers for Q1.
Meanwhile, Multiverse Mining and Cadbury presented impressive full-year audited accounts to the market. Cadbury’s dividend payout offering came below market expectation, even as all eyes are still on companies that are yet to release their 2022 audited financials ahead of the deadline, especially the banks. The increasing 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, NGX still trades below the T-line on a selling sentiment, even as attention is shifting to corporate earnings, due to the increasing number of companies notifying the exchange of their board meetings 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.
Technically, the decline phase of the market at this level supports an uptrend if the expected financials beat expectation, especially first-tier banks, 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 and money flow which is looking down.
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Oil price oscillation continued, rebounding powerfully to trade at $78.17 per barrel on fear of Middle East which is likely to cut production on global banking crisis in the midst of continued rate hikes, banks failure in Western world and a mixed outlook of economic recovery in China. Also, the attack on Ukraine is rising even when 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.
Monday’s trading opened slightly on the downside and was sustained for the rest of the session, despite oscillating, as selloffs in Airtel, Seplat and MTNN dragged the session down, a situation pushed the NGXASI below the psychological line 54,000 to an intraday low of 53,750,77basis points from its high of 54,780.44bps, before closing sharply below its opening figure at 53,750.77bps.
Market technicals were negative and mixed with lower volume of trade, compared to the previous session in the midst of breadth favoring the bears on a selling pressure as revealed by Investdata’s Sentiments Report showing 0% buy position and 100% sell volume. The total transaction volume index stood at 0.51 points, just as energy behind the day’s performance was weak going by Money Flow Index at 31.39pts, from the previous day’s 30.83pts, indicating that funds entered the market, despite closing lower.
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Index and Market Caps
At the close of Monday’s trading, the composite NGX All Share Index shed 1,141.76 basis points, closing at 53,750.77bps from the 54,892.53bps it opened, representing a 2.08% decline, just as market capitalization fell by N621.99bn to close at N29.28tr, from the previous day’s N29.90tr, which also represented a 2.08% depreciation in value.
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The downturn was driven by selloffs and profit taking in Airtel, MTNN, Seplat, GTCO, NCR, Unity Bank, Dangote Sugar and FTN Cocoa among others, which impacted negatively on Year-To-Date gain which reduce to 4.88%. Market capitalization YTD gain stood at N1.34tr, representing 4.89% above its opening level for the year.

Bearish Sector Indices
Sectorial performance indexes were down, led by NGX Energy after losing 2.02%, followed by Consumer goods, Insurance, Banking and Industrial goods with 0.79%, 0.555, 0.23% and 0.145 respectively.
Market breadth was negative as losers outpaced gainer in the ratio of 21:5, while transactions in volume and value were mixed after players exchanged 100.88m shares worth N4.34bn, with volume was driven by trades in GTCO, Zenith Bank, UBA, MTNN and FBNH.
Courtville Business Solution and NPF Microfinance were the best performing stocks for the session after gaining 6.67% and 2.70%, closing at N0.48 and N1.90 per share respectively, on market forces. On the flip side, NCR and Unity Bank lost 9.79% and 9.43% respectively, closing at N2.12 and N0.48per share, purely on selloffs and profit taking.

Market Outlook
We expect growth and yields to drive market sentiments 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.

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