Mixed Sentiments May Linger Amid Low Price Attraction, Dividend Investing, Reactions To Q1 Earnings

Market Update for May 14

The bear-run continued on the Nigerian Exchange Tuesday, as the benchmark NGX All-Share index closed lower once more, breaking down the critical support level of 97,689.04 basis points on a low traded volume and positive market breadth in the face of persistent sell sentiments and expected corporate earnings especially from insurance companies, and on the back of expected macroeconomic data. All eyes are still on the April Consumer Price Index scheduled for release on Wednesday, ahead of next week’s fixed income primary market auctions and the meeting of the Central Bank of Nigeria’s Monetary Policy Committee on Monday and Tuesday. The market is also expecting the Q1 GDP report that will reveal the state of the nation’s economy in the first three months of 2024.

The continued pullbacks indicate weakness on the NGX in the midst of the changing market fundamentals, dynamics and mixed numbers released so far, even as selloffs and profit taking continue in highly priced and blue chip stocks, weighing on the market.

However, the correction and pullbacks are creating buy opportunities for discerning investors and bargain hunters as the dividend rain continues with qualification and payment dates to guide positioning. Market players have continued to digest and reposition their portfolios on the strength of Q1 numbers and changing market dynamics. Dividend incomes are yet to provide some level of liquidity to support the market, despite the ongoing dividend payments and AGM meeting held so far.

The seeming weakness in the midst of sell sentiment across the major sectors of the market dragged the index southward, as investors and traders are expected take advantage of the low prices and valuation to buy into value. Given the oversold state of the market and mixed technical position as revealed by the double bottom chart pattern at the end of Monday trading which signals reversal of trend or continuation that needs to be confirmed. Already, the Q1 scorecards, expected corporate and economic numbers are likely to be the game changer, depending on the state of these numbers and unfolding happenings in the economy to further give insight and guide player’s decisions.

The NGX index’s action still trades below the T-line and 50-Day Moving Average, confirming the weight of selling sentiment in the market and weak momentum, as the index inched up on a high traded volume and a slight positive market breadth close to 8-day moving average exponential and 50 DMA to confirm continuation or reversal of trend depending on market forces and liquidity level. Market players are also looking 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, despite the continued mismatch of policies and implementation style as oscillating oil production output.

Annual General Meetings and board meetings notification continued on the NGX with the latest being Honeywell Flour Mill, among others, as Airtel Africa continued to update the market on its share buyback. Also, Initiates Plc and United Capital informed the market of their insiders 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, the market is weak, as it continues to look southward on selling sentiment as revealed by candlesticks formation and momentum indicators. As ADX is looking down at 30.67, while RSI and Money Flow Index are mixed to read 31.89and 44.73 points against the previous session 33.16 and 43.57 points respectively. Market players should watch this current trend and trade with caution after the index had pulled back again in the face of funds leaving the market slowly. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and selloffs in the midst of a decline phase.

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Oil prices slide on Tuesday, as it continues its oscillation to trade at $82.38 per barrel in the midst of OPEC keeping its demand and supply projection unchanged, as traders processed key US inflation data. As Middle East conflict continued in the face of mixed global macroeconomic data and unclear policy direction of major central banks. 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 lower and it was sustained throughout the session, despite oscillating on profit taking and positioning  in some stocks, a situation that pushed the NGX’s index to an intra-day low of 97,447.27bps from its highs of 97,711.88bps, before closing below its opening figure at 97,473.98bps.

Market technicals for the session were negative and mixed, as volume was lower when compared to the previous session in the midst of breadth favoring the bulls on a selling sentiment as revealed by Investdata’s Sentiments Report showing 10% buy position and 90% sell volume. The total transaction volume index stood at 0.65 points, just as energy behind the day’s performance was  relatively weak as Money Flow Index inched up to read  44.73pts, from the previous day’s 43.57pts, indicating that funds entered  the market, despite sliding down.

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Index and Market Caps

The benchmark NGXASI, at the close of trading on Tuesday lost 234.76bps, closing at 97,473.98bps after opening at 97,709.38bps, representing a 0.24% decline, just as market capitalization fell by N132.64bn, closing at N55.13tr from the previous day’s N55.27tr, which also represented a 0.24% 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 selloffs and profit taking in the shares of Dangote Sugar, Cadbury, UBA, NEM, FBNH and Caverton among others. This impacted mildly on Year-To-Date gain which reduce to 30.36%. Market capitalization YTD gain stood at N11.2tr, representing 36.21% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes were in red, save for the NGX Industrial Goods that closed 0.02% higher, while the NGX Insurance index led the decliners after losing 1.09%, followed by Banking and Consumer goods with 1.02% and 0.81% respectively. Just as NGX Oil/Gas finished flat.

Market breadth turned positive as gainers outnumbered losers in the ratio of 22:20, while transactions in volume and value were down after investors exchanged 306.60m shares worth N5.81bn. Volume was driven by trades in Accesscorp,GTCO, NB, UBA and Royal Exchange Insurance.

Tantalizer and Learn Africa were the best performing stocks, gaining 10% each, closing at N0.55 and N3.63 per share respectively on market forces and earnings expectation. On the flip side, Dangote Sugar and PZ lost 10% each, closing at N40.50 and N22.50per share, purely on selloffs.

Market Outlook

We expect mixed sentiments to continue in the face of low price attraction, dividend investing and reactions to Q1 numbers as Insurance corporate earnings are expected with dividend announcements and CPI report today, 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