Mixed Sentiment Amid Profit Taking, Repositioning Ahead Of 2024 Dividend Season

Market Update for November 27

Monday’s was a positive outing on the Nigerian Exchange as trading for the last few days of November opened stronger with a very high traded volume and positive market breadth, extending the buying interests and positive momentum for three consecutive sessions. Market players continued to interpret the policy outlook and direction of the Central Bank of Nigeria (CBN) as it works towards achieving the Federal Government’s target of growing the country into a US$1tr economy, amid two quarters of rate hiking, as well as the proposed fresh round of bank recapitalization as part of bids to drive the much expected economy development.
The NGX All-Share index closed higher on increased buying interests in the financial services stocks, especially banks that had posted positive earnings and which support payout in the face of the proposed primary market activities to boost their capitalization. Already, the banking sector remains the most consistent in dividend payment in the history of the Nigerian stock market. Consequently, we note that portfolio reshuffling and rebalancing has continued ahead of the year-end and dividend season, with all eye on the Santa- Claus rally, year-end window dressing and 2023 audited full-year earnings reporting season which kicks offs in January 2024. A glimpse of what we should expect at year end has been provided by the unaudited 2023Q3 earnings reports released recently.
Specifically, the earnings reports presented through the exchange offer an insight into the high possibility of dividend growth, rather than a cut at the end of this current financial year. This is especially true of companies in the service sectors whose earnings yield and Earnings Per Share support high payout ratios at the end of the day, while manufacturing companies and others 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 that is underway or 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, as the market interpret the outcome of yesterday 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 $79.87 per barrel in the midst of OPEC delaying its meeting and ceasefire in the middle east conflict. As rate hike pause by some of the central banks due to cooling inflation continue ahead of December policy meeting. The influence of demand and supply oil are 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.
Monday’s trading opened in the upside and was sustained throughout the session, despite oscillating on position taking in banking stock and blue chip companies, while profit booking hit some stocks, a situation that pushed the Index to an intraday high of 71,566.58bps from its lows of 70,81-.51bps, before closing above its opening level at 71,353.89bps.
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 72% buy position and 28% sell volume. The total transaction volume index stood at 1.74 points, just as the momentum behind the day’s performance was strong, with Money Flow Index looking up to read 76.93pts, from the previous day’s 75.87pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Monday’s trading, the benchmark NGXASI inched up by 123.41bps, closing at 71,353.81bps, from the 71,230.48bps opening level, representing a 0.17% up. Market capitalization fell by N132.43bn, closing at N39.04tr, from the previous day’s N39.17tr, which also represented a 0.34% value loss.

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Meanwhile, the day’s upturn was driven by accumulation in the shares of FBNH, Accesscorp, GTCO, Zenith Bank, Wapco, Guniness and NB among others. This impacted mildly on Year-To-Date gain, which rise to 39.22%, while Market Capitalization YTD gain stood at N10.94tr, representing a 39.98% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes closed mixed, as the NGX Consumer Goods index finished 0.88% lower, while the NGX Banking led the advancers after gaining 1.71%, followed by Industrial goods with 0.01%. while NGX Oil/Gas and Insurance closed flat.
Market breadth was positive as gainers outnumbered losers in the ratio of 32:20, while activities in volume and value terms were up, after players exchanged 745.67m shares worth N3.95bn, driven by trades in Universal Insurance, Accesscorp, Unity Bank, Verita Kapital and Transcorp.
FBNH and John Holt were the best performing stocks, gaining 10% each, closing at N22.00 and N1.87per share respectively, on market sentiment and forces. On the flip side, Etranzact and Unity Bank lost 9.46% and 9.24%, closing at N6.70 and N1.67 per share, purely on the back of selloffs and profit taking.

Market Outlook
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 up 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.

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