Mixed Sentiments, As Investors Eye Dividend, Defensive Stocks, Position Ahead Of Macroeconomic Data
Market Update for April 12
Midweek’s trading performance on the Nigerian Exchange was flat and mixed, while the benchmark NGX All-Share index managed to close slightly in the green, thereby halting the previous sessions’ loses on a low traded volume and positive market breadth that signals a rekindled buying interest as investors bet on the pending 2022 audited financials and expected Q1 2023 earnings reports.
The seeming positive sentiment resurfaced after five straight sessions of losses, even as all eyes are on expected macroeconomic data, especially the Consumer Price Index for the month of March, and the Q1 GDP numbers, at a time the International Monetary Fund (IMF) has projected that Nigeria’s economic growth would contract to 3% this year.
The market’s recent pullback has created buy opportunities for smart and technical traders, amid the expected release of first quarter earnings and price adjustments for dividends offered by directors to sway market direction in the short-run. The ongoing payment of dividend is likely to provide more liquidity in the market in form of reinvestments as more payment dates draw closer. Thereby giving new momentum or energy to the market stability in the Q2 portfolio repositioning in a transition period.
That notwithstanding, the market has confirmed its decline phase, as the NGX index traded below the 50-Day simple moving average and EMA, to signal a bottom reversal pattern for traders and discerning investors which requires confirmation before jumping into position as recent markdown stocks had rebounded on prevailing undervalue of these companies. even when Q1 numbers are likely to be mixed, due to low economic activities as a result of to cash crunch.
The prevailing dividend yields and low market price to earnings ratio provides better opportunities for discerning investors to hedge against inflation even as fixed income market yields look attractive. There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as a policy shift may be a plus for equities on a likely financial market and economic reset. Market volatility remains at the extreme on mixed sentiment as T-line stay above the index action ahead of the next market forces, due to the increasing number of companies announcing their board meeting dates to approve Q1 2023 numbers.
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Oil price oscillation continued, as crude rebounded to trade at $87.33 per barrel in the midst of better than expected US economic data as revealed by strong labor market report and cooling inflation rate, that should signal Fed rate easing. As 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.
Meanwhile, Wednesday’s trading started slightly on the downside and oscillated for the rest of the session on position taking in blue chip stocks, among others, a situation that pushed the NGXASI to intraday high of 51,960.77 basis points from its lows of 51,935.95ps, before closing marginally above its opening figure at 51,953.41bps.
Market technicals were positive and mixed with lower 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 70% buy position and 30% sell volume. The total transaction volume index stood at 0.80 points, just as momentum behind the day’s performance was weak going by Money Flow Index at 30.87pts, from the previous day’s 31.54pts, indicating that funds left the market, despite closing flattish.
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Index and Market Caps
Midweek’s trading ended with the NGX All Share Index inching up 0.42 basis points, closing at 51,953.41bps from the 51,952.99bps it opened, representing a 0.008% up, just as market capitalization rose by N22m to close at N28.30tr, from the previous day’s N28.30tr, which also represented a 0.008% value gain.
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The day’s upturn was driven by demand in the shares of Skyway Aviation, Berger Paints, Transcorp, Cutix, SterlingNG, Multiverse and International Breweries among others, which impacted mildly on Year-To-Date gain which inched to 1.37%. Market capitalization YTD gain stood at N247 billion, representing 1.38% above its opening level for the year.
Mixed Sector Indices
Sectorial performance indexes were mixed as the NGX Banking closed 0.09% lower, while NGX Insurance led the advancers after gaining 0.31%, followed by Consumer and Industrial goods with 0.19% and 0.01% respectively. Just as NGX Energy was flat.
Market breadth turned positive as gainers outpaced losers in the ratio of 17:11, while transactions in volume and value were down after players exchanged 255.16m shares worth N1.72bn. Volume was driven by trades in Transcorp, Fidelity Bank, UBA, Zenith Bank and Royal Exchange Assurance.
Skyway Aviation and ABC Transport were the best performing stocks for the day after gaining 10% and 9.68% respectively, closing at N5.50 and N0.34 per share respectively, on market forces. On the flip side, Royal Exchange Assurance and Champion Breweries lost 10% and 9.84% respectively, closing at N0.54 and N4.58per share, purely on selloffs and profit taking.
We expect mixed sentiments to continue on renewed positioning in some stocks that had recently suffered losses, ahead of the March inflation data and Q1 earnings expectation in the midst of price adjustment for dividend and pending 2022 audited numbers. 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.
CRO|Investdata Consulting Ltd
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