Investors Realign Portfolios On Low Price Attraction, Dividend, Amid Reactions To Q1 Earnings Inflow

Market Update for May 9

Market sentiments on the Nigerian Exchange on Thursday turned slightly positive, signaling an uptrend ahead that needs confirmation and monitoring for sustained momentum at Friday’s trading session and next week.

The mixed sentiment is reflected in the market internals and traded volume ahead of more corporate earnings inflow, the inflation report for April, and Q1 GDP numbers expected to give direction as to where the market is headed in the midst of changing fundamentals and mixed numbers released so far. We note that earnings emanating from the telecoms industry remains negative as a reflection of the impact of the significant foreign exchange losses as shown in their earnings reports. Airtel Africa recommended dividend of 3 cents amounting to $13 billion, despite its $549m FX loss, even as it aggressively pursues its share buyback programme.

In another development, as banks prepare to meet the new minimum capital base, and in a move that will attract move listings to the Nigerian Exchange, the nation’s Securities & Exchange Commission (SEC) is proposing a new rule that will limit the amount private companies can raise from the market to N15bn (READ MORE).

The benchmark NGX All-Share index inched up on a very high transacted volume to form an inverted hammer and a reversal chart pattern that signals reversal or continuation of trend, depending on market forces as trading opens on Friday. The bear run was halted, indicating that a bull-trend is underway, creating buy opportunities for discerning investors and bargain hunters, as the dividend rain continues with qualification and payment dates to guide positioning. Market players have continued to digest and reposition their portfolios on the strength of Q1 numbers and changing market dynamics. Dividend incomes are expected to provide some level of liquidity to the market as payment and AGM meeting dates announced by various companies fall within this month.

There is a seeming rebound in the midst of buying interest across the major sectors of the market supported the index, as investors and traders take advantage of the low prices and valuation to buy into value. This is given the oversold state of the market and mixed technical position as revealed by the bottom chart pattern at the end of Thursday trading which signals the onset of a reversal of trend or continuation that needs to be confirm. Already, the Q1 numbers are likely to be the game changer, as more corporate earnings are expected and unfolding happenings in the economy to further give insight and guide player’s decisions.

The NGX index’s action still trades below the T-line and 50-Day Moving Average, confirming the weight of selling sentiment in the market and mixed momentum, as the index inched up on a high traded volume and a slight positive market breadth close to 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 oscillating oil production output.

More companies on the exchange are notifying investors of their AGM and board meetings, the latest being UPDC, and Daar Communications, among others. The Initiates Plc informed the market also 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 reversal signal on the NGX, as the market was up on mixed sentiment as revealed by candlesticks formation and momentum indicators. As ADX is looking down at 33.18, while RSI and Money Flow Index are up to read 36.31 and 50.52 points against the previous session 36.00 and 41.60 points respectively.  Market players should watch this current trend and trade with caution after the index had signaled reversal in the face of funds entering the market slowing down. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and buying interest in the face of a distributing market.

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 sustained its uptrend heading to first weekly gain in weeks, as it continues its oscillation to trade at $83.84 per barrel in the midst of improving china economic data and Middle East conflict as ceasefire talk yet to yield any positive results. Just as global mixed macroeconomic data persists to give unclear policy direction of major central banks. 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, Thursday’s trading started in the green and was sustained throughout the session, despite oscillating on profit taking and buying interest in some stocks,  a situation that  pushed the NGX’s index to an intra-day high of 98,428.90bps from its lows of 98,215.80bps, before closing marginally above its opening figure at 98,255.72bps.

Market technicals for the session were mixed and weak, as volume was higher when 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 19% buy position and 81% sell volume. The total transaction volume index stood at 1.44 points, just as energy behind the day’s performance was  relatively strong as Money Flow Index inched up to read  50.52pts, from the previous day’s 41.60pts, indicating that funds entered  the market.

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Index and Market Caps

At the end of Thursday, the NGXASI inched up by 31.72bps, closing at 98,255.72bps after opening at 98,223.97bps, representing a 0.03% up, just as market capitalization rose by N17.96bn, closing at N55.57tr from the previous day’s N55.55tr, which also represented a 0.03%  value gain.

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.

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The upturn was driven by position taking in the shares of GTCO, Zenith Bank, Oando, Wapco, Unilever, UBA, Mutual Benefits and Wapic among others. This impacted mildly on Year-To-Date gain which inched up to 31.4%. Market capitalization YTD gain stood at N11.49tr, representing 36.74% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed, as the NGX Consumer Goods closed lower, while the NGX Banking index led the advancers after gaining 1.06%, followed by Insurance and Industrial goods with 0.47% and 0.04% respectively. As NGX Oil/Gas finished flat.

Market breadth turned positive as gainers outnumbered losers in the ratio of 22:21, while transactions in volume and value were up after investors exchanged 675.66m shares worth N9.17bn. Volume was driven by trades in NB, UBA, GTCO, Zenith Bank and Transcorp.

Learn Africa and Tantalizer were the best performing stocks, gaining 10% and 7.69% respectively, closing at N3.30 and N0.42 per share respectively on market forces and injection of capital. On the flip side, PZ and Sovereign Trust Insurance  lost 9.94% and 9.52% respectively, closing at N30.80 and N0.38per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments to continue in the face of low price attraction, 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