Mixed Sentiments May Linger, Amid Dividend Investing, As Low Valuation Attract Investors

Market Update for April 23

The bears resurfaced on the Nigerian Exchange Tuesday, reversing the previous gain as profit taking hit financial services stocks, as well as others. This weighed on the benchmark NGX All-Share index which close lower on an above average traded volume but negative market breadth in the midst of dividend qualification dates and selling sentiment.

This pullback is expected to create new entry opportunities for market players give the ensuing low valuations ahead of more 2024Q1 earnings reports and GDP data which will give more insights into the current financial conditions of the companies and state of the economy. Already, traders and investors are looking forward to these numbers and unfolding happenings in the economy to further guide their investment decisions.

During the trading session, the market reacted to the belated 2022 full year earnings report submitted by Oando Plc that revealed mixed performance, with numbers below market expectation. The full year turnover, for example, rose by 148.8% to N1.99tr, while net loss amounted to N81.23bn, compared to the N32.86bn profit reported in 2021, representing 347.2% decline. It 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 selling sentiments and continued volatility are part of stock market dynamics that come with pullbacks, or correction after a bull run or rally, despite the changes in market and economic fundamentals. This is happening 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. As 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.

The NGX index’s action continued to trade below the T-line and 50-Day Moving Average, confirming the weak momentum while extending the decline phase, as the index witnessed another dip on above average traded volume and negative market internals 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.

Listed companies on the exchange continued to notify the investing public of their AGM meetings, as well as closed period and board meeting to approve unaudited Q1 2024 reports. The latest came from Fidelity Bank, UBA and others, while MRS Oil Nigeria informed the market of its plans to delist from the NGX. 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 a mixed signal on the NGX that support reversal and continuation chart pattern, which needs to be confirmed as trading opens this morning. The market still remain on the selling sentiment as revealed by candlesticks formation and momentum indicators. The NGX is somewhat now, with the ADX looking up at 34.52, while RSI and Money Flow Index are down to read 33.13 and 24.60 points against the previous session 34.98 and 31.20 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.

To navigate the rest of the quarter and beyond profitably using fundamental and technical analysis to run, join investdata live sessions at noon every Monday, Wednesday and Friday trading day “and also get investdata technical toolbox to play the current state of the market do suggest that discerning investors are gradually becoming greedy, while others are fearful, as seen in the recent range market. Despite the oscillating volume of transaction witnessed in recent time, it is time to go shopping for undervalued stocks, sectors and the next insider playing opportunity.

Oil price rebounded  on Tuesday as it continues to oscillate and  trade at $88.72 per barrel in the midst of weaken dollar and drop in US inventories, as investors looks to the state of global economies in the face of cooling  tension in Middle East and mixed macroeconomic data from matured economies.   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.

Tuesday’s trading opened in the upside but pulled back to oscillates for  the rest of the session, as profit taking hits some  banking stocks and others, a situation that pushed the NGX’s index to an intraday low of 99,293.28bps from its highs of 99,758.16bps, before closing below its opening figure at 99.311.54bps.

Market technicals for the session were negative and mixed, as volume was higher 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 4% buy position and 96% sell volume. The total transaction volume index stood at 1.02 points, just as impetus behind the day’s performance was weak as Money Flow Index slide down to read 24.60pts, from the previous day’s 31.20pts, indicating that funds left the market.

For you to successfully invest and trade in this volatile market in 2024, order for Investdata’s video on Buy & Sell Technical Analysis Toolbox to navigate the volatile market profitably, enhance trading decisions and boost your bottom line. Also, to up your game in stock trading and investing, understanding the key to trading price and index action will go a long way to make the difference in your trading results, check out the video materials above and prepare for Q3 Master Class.

Index and Market Caps

At the end of trading, the composite NGX All-Share Index  shed 353.51bps, closing at 99,311.54bps after opening at 99,665.05bps, representing a 0.35% decline, just as market capitalization fell by N199.80bn, closing at N56.17r from the previous day’s N56.37tr, which also represented a 0.35%  depreciation in value.

Attention: If you have not signed up for INVESTDATA’s buy and sell signal setup, don’t delay, because the number of stocks entering their oversold range has increased as market correction and pullbacks call for caution and positive chart patterns to be on our watchlist. These stocks have potentials to retrace, considering their earnings prospects and the oscillating moves in an upmarket and weak economy.

To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling, and repositioning as we await an economic reform policy that can stimulate and re-track the economy to the path of growth and development.

Meanwhile, the session downturn was driven by profit taking and selloffs in Oando, Nestle, GTCO, Zenith Bank, Accesscorp and Honeywell among others. This impacted negtaively on Year-To-Date gain which reduce to 32.82%. Market capitalization YTD gain stood at N13.51trillion, representing 38.88% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were down, save for the NGX Industrial goods that closed higher by 0.30%,  while NGX Banking led the decliners after losing 2.94% followed Consumer goods and Insurance with  0.80% and 0.51% respectively, Just as  NGX Energy finished flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 24:17, while transactions in volume and value were up after investors exchanged 574.43m shares worth N7.84bn. Volume was driven by trades in Transcorp, UBA, Accesscorp, Universal Insurance and Zenith Bank.

Sunu Assurance and Japaul Gold were the best performing stocks, gaining 10% and 9.84% closing at N1.10 and N2.01 per share respectively on market forces and sentiment. On the flip side, Honeywell Flour and FBNH lost 9.89% and 9.88%, closing at N3.19 and N21.90 per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments to continue in the face of dividend investing and concerns for new capital 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