Mixed Sentiments, Easter Selloffs May Continue Amid Positioning For Q1 Earnings, Profit Taking

Market Update for April 5
Equity prices at the midweek suffered losses again in a mixed session of buying and selling interests across the major sectors of the market as players continue reacting to recent earnings and economic data. Selloffs in telecomm giant- Airtel Africa weighed down on the benchmark NGX All-Share index forcing it to close sharply lower on a low traded volume and negative market breadth, thereby extending the bear run for the fourth consecutive session in a row.
Investors are also repositioning early for the expected Q1 corporate earnings, based on the current price levels that are largely perceived as attractive for entry, while technical traders are cautiously waiting for pullbacks or corrections to jump into the market. It is noteworthy that selling sentiment in recent times is growing, reflecting the weak momentum in the market, with the payment date of stocks whose markdown dates for dividend draw even closer. This is providing support for liquidity in the market as investors reinvest their dividends.
The delayed 2022 audited financials, especially the first-tier banks are also likely to support the market as price adjustments of some stocks are becoming attractive for fresh entry, thereby giving new impetus or energy to the market stability in the Q2 portfolio repositioning.
Midweek’s market pullback confirms it is already in the decline phase as the NGX index traded below the 50-Day simple moving average and EMA, thereby creating opportunities for traders and discerning investors to take position as recent markdown stocks had rebounded on prevailing status of the undervalued stocks. 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 provide 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 propelled 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.
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Oil price oscillation continued Wednesday, as crude traded at $84.99 per barrel in the midst of weak economic data in the first and second largest economy, coupled with increasing fear of recession. 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 opened sharply on the downside and was sustained for the rest of the session, despite oscillating on selloffs and position taking in blue chip stocks and others, a situation that pushed the NGXASI below the 54,000 mark to intraday low of 53,003.51 basis points from its highs of 54,041.08ps, before closing below its opening figure at 53,018.97bps.
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 pressure as revealed by Investdata’s Sentiments Report showing 1% buy position and 99% sell volume. The total transaction volume index stood at 0.77 points, just as momentum behind the day’s performance was weak going by Money Flow Index at 35.40pts, from the previous day’s 35.81pts, indicating that funds left the market.
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Index and Market Caps
Midweek’s trading closed with the benchmark NGX All Share Index shedding 1.016.42 basis points, closing at 53,018.97bps from the 54,035.39bps it opened, representing a 1.88% decline, just as market capitalization fell by N553.70bn to close at N28.99tr, from the previous day’s N29.44tr, which also represented a 1.88% deprecation in value.
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The downturn was driven by selloffs in the shares Airtel, Flour Mills, Champion, FCMB, Nahco, Multiverse and Ikeja Hotel among others, which impacted negatively on Year-To-Date gain which reduce to 3.45%. Market capitalization YTD gain stood at N1.09tr, representing 3.47% above its opening level for the year.

Bullish Sector Indices
Sectorial performance indexes were in green, save for the NGX Consumer Goods that closed 0.26% lower, while the NGX Insurance led the advancers after gaining 0.88%, followed by Banking, Energy and Industrial goods with 0.49%, 0.12% and 0.04% respectively.
Market breadth was negative as losers outpaced gainers in the ratio of 14:11, while transactions in volume and value were down after stockbrokers transacted 197.33m shares worth N2.67bn, with volume driven by trades in UBA, Transcorp, Zenith Bank, Oando and Mutual Benefits Assurance.
Coronation Insurance and Mutual Benefits Assurance were the best performing stocks for the day after gaining 7.50% and 6.25% respectively, closing at N0.43 and N0.34 per share respectively, on market forces. On the flip side, Airtel Africa and Ikeja Hotel lost 10% and 9.85% respectively, closing at N1,331.10 and N1,19per share, purely on selloffs profit taking.

Market Outlook
We expect mixed sentiments and Easter selloffs to continue on positioning and profit taking, 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