Mixed Sentiments Continues On Positioning, Profit Booking, Ahead Of Q1 Earnings Inflow

Market Update for April 4
Tuesday’s trading activities on the Nigerian Exchange was mixed and volatile as the bear dominance continued, following the reaction to the latest macroeconomic data and earnings reports that came with mixed dividend payouts. Interest rate and yields have continued to contest for flow of funds in the face of rising inflation and undervalued equities that are being adjusted for dividends recommended ahead of their payment dates.
The benchmark NGX All Share index at the end of the session extended the bear transition for the third successive session on a less than average traded volume and negative market breadth as investors reposition early for Q1 numbers, based on the current price levels that are attractive to buy in, while technical traders are cautiously waiting for pullback or corrections to jump into the market. It is noteworthy that selling sentiment in recent times is growing, reflecting the weak momentum.
There were also the effects of the delay in the release of 2022 audited financials from first-tier banks which only recently started rolling in, but driving this mixed movement in the banks that are yet to release theirs even when it was not the banks’ making, is affecting the market stability in the Q2 portfolio repositioning.
The recent market pullback slowed down, as the NGX index traded slightly above the 50-Day EMA, after crossing down the 50-Day SMA, thereby creating opportunities for traders and discerning investors to take position as recent markdown stocks had rebounded on prevailing undervalue of these companies. There is also the effect of portfolio rebalancing while positioning for Q2 trading on the strength of expected 2023 Q1 earnings reports, even when it seems likely to be mixed numbers for Q1 as a result of low economic activities due to cash crouch.
The prevailing 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 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 selling sentiment as T-line stay flat ahead of the next market forces, due to the increasing number of companies announcing their board meeting dates to approve Q1 2023 numbers.
Technically, the NGX remains at the distribution phase, a situation that supports an uptrend or correction as players digest the latest financials, especially from first-tier banks and others which are mixed. This is an indication of a bearish divergence between the index action and momentum on a dally chart that supports a rally. Let us keep our gaze on market forces to confirm the next move, as money flow weak remain relatively but looking up.
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Oil price oscillation continued, as it rebounded sharply on sudden production cut by OPEC, as crude trade at $85.58 per barrel in the midst of weak economic activities as reveal by US latest PMI and that of China economic. Just 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.
Tuesday’s trading started slightly on the downside but oscillated throughout the session on selling sentiment and position taking in blue chip stocks and others, a situation that pushed the NGXASI to an intraday low of 54,051.37 basis points from its highs of 54, 206.00ps, before closing below its opening figure at 54,082.96bps.
Market technicals were negative and mixed with lower transaction volume, compared to the previous session in the midst of breadth favoring the bears on a selling sentiment as revealed by Investdata’s Sentiments Report showing 20% buy position and 80% sell volume. The total transaction volume index stood at 1.17 points, just as momentum behind the day’s performance was weak going by Money Flow Index at 35.81pts, from the previous day’s 36.68pts, indicating that funds left the market.
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Index and Market Caps
At the end of Tuesday’s trading, the composite NGX All Share Index shed 101.38 basis points, closing at 54,035.39bps from the 54,184.28bps it opened, representing a 0.27% decline, just as market capitalization fell by N81.15bn to close at N29.44tr, from the previous day’s N29.52tr, which also represented a 0.27% deprecation in value.

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Meanwhile, Tuesday’s downturn was driven by profit taking in the shares NGXGroup, Multiverse, Eterna, UPDC, Zenith Bank, GTCO and Aiico among others, which impacted negatively on Year-To-Date gain which reduce to 5.43%. Market capitalization YTD gain stood at N1.59tr, representing 5.45% above its opening level for the year.

Mixed Sector Indices
Sectorial performance indexes were mixed, as NGX Banking and Industrial goods closed lower by 1.34% and 0.04% respectively, while NGX Insurance led the advancers after gaining 0.89%, followed by Energy and Consumer goods with 0.25% and 0,12% respectively.
Market breadth was negative as losers outpaced gainers in the ratio of 21:14, while activities in volume and value were mixed after investors exchanged 296.74m shares worth N3.07bn, with volume driven by trades in Fidelity Bank, Oando, Transcorp, Mansard and UBA.
SCOA and Nahco were the best performing stocks for the day after gaining 10% and 9.55% respectively, closing at N0.99 and N9.75 per share respectively, on market forces and high dividend payout. On the flip side, Multiverse and Eterna lost 9.88% and 8.94% respectively, closing at N2.92 and N5.60per share, purely on selloffs profit taking.

Market Outlook
We expect mixed sentiments on position taking and profit booking, ahead of Q1 earnings expectation in the midst of price adjustment for dividend and remaining 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.

Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605