Mixed Sentiment  Lingers Amid Dividend Investing, Banks’ Reapitalisation, Earnings Inflow

Market Update for April 22 

Trading activities on the Nigerian Exchange opened the week on a marginal gain, thereby halting last week’s selloffs and pullbacks following the renewed buying interest in banking stocks and others that had suffered losses recently in the midst of dividend qualification dates and high yields. This was due to the low valuations ahead of expected 2024Q1 earnings reports and GDP to give more insights into their current financial direction and the state of the economy, as market players are looking forward to more Q1 numbers and audited reports of the insurance companies.

Recently, Unilever Nigeria made available its first quarter scorecard showing a two-digit growth in top and bottom lines at 57.81% and 25.84% respectively, with revenue and profit of N32.32bn and N3.36bn. This translated to Earnings Per Share of 58 kobo, reflecting the resilient of the company in a gloomy business environment like ours today. Many companies in that sector are posting negative earnings to reflect the effects of their foreign exchange losses. Also, at the close of trading, Oando released it belated 2022 audited financial that revealed mixed performance. Revenue rose by 148.8% to N1.99tr, but it reported a net loss of N81.23bn, compared to the N32.86bn profit reported in 2021, representing 347.2% decline, which translated to a loss per share of N6.00, meaning that investors may have to wait for a turnaround in the company’s numbers to impact share price and reward shareholders.

The mixed sentiments and slight rebound are part of stock market dynamics that come as a sign of reversal after a period of pullbacks or correction, despite the changes in market fundamentals. This is amid the higher interest rate and yields in alternative investment windows in the face of mixed economic data and ongoing reform policies of the government. Also, market players have continued to digest recent macroeconomic reports and unfolding activities in the foreign exchange market with regard to how it impacts productivity level on the nation economy going forward and attraction of foreign inflow.

Investors have continued to analyze and study the mixed corporate earnings and macroeconomic data that reveal the state of the economy and impact of the ongoing government policies. All eyes are on the nation’s Q1 GDP which will give more insight as to where the economy is headed. This is notwithstanding the relative stability that has returned to the foreign exchange market in the face of rising inflation, increasing foreign inflow and Naira appreciation due to CBN releasing dollar to BDC as intervention and oil price above 2024 budget benchmark price.

Despite, the seeming rebound, NGX index’s action continued to trade below the T line and 50 day moving average to confirm the weak momentum while extending the decline phase, as the index witnessed slight up market on a low traded volume and negative market breadth to stay below the 8-day moving average exponential and 50 DMA to confirm continuation or reversal of trend depending on market forces and state of Q1 earnings reports of listed companies.  As market players also look 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 declining oil production in the last months is a minus to the nation reserve.

The notifications for AGMs of companies, as well as closed period and board meeting to approve unaudited Q1 2024 reports continue on the exchange. The latest came from Seplat, Dangote Cement, Berger Paints and others, while Airtel Africa updated the market on its share buyback, even as Universal Insurance informed the exchange of its delay in filing its 2023 audited accounts. Also, The Initiates notified the market of insider 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 sign of strength returning to NGX that will support reversal chart pattern, which needs to be confirmed as trading opens on Thursday. Still the market is weak on mixed sentiment as revealed by candlesticks formation and momentum indicators. This is somewhat in the market, as ADX is looking up at 33.72, while RSI and Money Flow Index are mixed to read 34.98 and 31.20 points against the previous session 33.52 and 26.90 points respectively.  Market players should watch this current trend and trade with caution after the index had signaled reversal in the face of decline phase. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and selloffs in the face of others investment windows returns remain below inflation at 33.2% as Naira continues to look up in recent days.

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Oil price slipped on Monday as it continues oscillating, trading at $87.52 per barrel in the midst of Middle East crisis cooling down and expectation major macroeconomic data from matured economies, even as US inventories rising.   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, Monday’s trading started in the green and it was sustained for the rest of the session, despite oscillating on profit taking and buying interest in financial services stocks, a situation that pushed the NGX’s index to an intraday high of 99,846.26bps from its lows of 99,507.03bps, before closing marginally above its opening figure at 99.706.40bps.

Market technicals for the session were mixed and weak, as volume was higher compared to the previous session in the midst of breadth favoring the bears on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 59% buy position and 41% sell volume. The total transaction volume index stood at 0.69 points, just as energy behind the day’s performance was weak as Money Flow Index inched up to read 31.20pts, from the previous day’s 26.90pts, indicating that funds entered the market.

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Index and Market Caps

The NGX All-Share Index at the end of trading inched up by 166.65bps, closing at 99,706.40bps after opening at 99,539.75bps, representing a 0.18% up, just as market capitalization rose by N70.87bn, closing at N56.370r from the previous day’s N56.30tr, which also represented a 0.18% value gain.

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Monday’s upturn was driven by position taking in GTCO, Zenith Bank, UBA, Wapco, Transcorp and Aiico Insurance among others. This impacted mildly on Year-To-Date gain which inched up to 33.34%. Market capitalization YTD gain stood at N13.7trillion, representing 39.38% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed with the NGX Banking, Insurance and Industrial goods closed higher by 1.27%, 0.46% and 0.06% respectively, while, NGX Consumer goods was down with 0.01%, while NGX Energy finished flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 19:17, while activities in volume and value were mixed after investors exchanged 306.60m shares worth N5.30bn. Volume was driven by trades in GTCO, Accesscorp, UBA, Universal Insurance and Zenith Bank.

Japaul Gold and GTCO were the best performing stocks, gaining 9.58% and 9.53% closing at N1.83 and N36.70 per share respectively on market forces and sentiment. On the flip side, TIP and Prestige Assurance lost 10% and 9.84%, closing at N1.80 and N0.55 per share, purely on profit taking.   

Market Outlook

We expect mixed sentiment  to continue in the face of dividend investing and new capita base for the banks as more corporate earnings 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