Mixed Sentiments May Linger As Investors Realign Portfolios, Eye Dividend Stocks

Market Update for November 20

Monday’s trading on the Nigerian Exchange was mixed, starting the week on a negative note, as profit taking resurfaced after four straight sessions of up market during which the composite All-Share index traded above 71,000 basis points psychological line on a selling sentiment and low traded volume. The candlestick formation revealed a top reversal pattern and no supply that indicates the possibility of smart money making up prices as monetary policy direction remains unclear, on the back of yet another postponement of the Central Bank of Nigeria Monetary Policy Committee meeting for the second time in a row. Meanwhile, Investdata notes that there is the increased macroeconomic headwinds, amidst the heightened uncertainty that could have made the situation far worse than it is today for equity investors, but for the fact that domestic institutional and retail investors have filled the void created by the exit of foreign players from the market.
Despite, the seeming profit booking in the market on Monday, the equity space remains the quickest way to hedge against the rising inflationary pressure in the system today.
So, a pullback or correction will create another entry opportunity for discerning market players, as all eyes are on the midweek Treasury bill primary auction outcome for further insights into the flow of funds in the financial market, in the face of year-end seasonality. This had already kicked off with impressive Q3 earnings and rising fixed income market yields that remains a mixed bag.
The NGX All-Share index on Monday closed marginally lower on low traded volume and positive market breadth in the face of profit booking in banking stocks and others. As the 2024 financial year is set to begin ahead of full-year earnings and dividend season in Q1 2024, the latest corporate earnings on the exchange has offered an insight into the high possibility of dividend growth at the end of this current financial year. This is especially true of companies in the service sectors with earnings yield and Earnings Per Share that support high payout ratios at the end of the day. Also, the time frame for dividend payment and capital gains are now shorter, hence the ongoing rebalancing by portfolio managers, looking at the different investment choices or windows to create value, especially as real rate of return is still above inflation.
The divergence between the index’s action and momentum indicators signals that a reversal is underway and needs to be confirmed, even as the NGX index still trades above the T-Line and 71,000 mark to pullback from the previous session’s level. Traders need to watch out as the market consolidates at this level of distribution phase in the midst of a very high volatility.
To navigate the rest of the quarter and year profitably using fundamental and technical analysis, join investdata’s live sessions at noon every 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 mixed trend and volume pattern, it is time to shop for undervalued stocks, sector rotation, go for defensive stocks at the next insider playing opportunity.
Oil price oscillation continued, as it rebounded in the last few trading days to trade at $82.02 per barrel in the midst of positive economic data and possibility of rate cut by some of the central banks as inflation data continue to cool off. As the ongoing Middle East conflict influencing demand and supply. With geopolitical tensions rising across the globe at a time the Russia-Ukraine war gradually approaches its third year, and remains a major concern with much more at stake than previously thought. The supply tightening due to the Russia-Ukraine war will propel the up and down movement in oil price, which also drive market volatility across the globe.
Meanwhile, Monday’s trading started slightly in the upside and oscillated for the rest of the session, pulling back thereafter on profit taking in blue chip companies, and positioning in others stocks,a situation that pushed the Index to an intraday low of 70,959.16bps from its highs of 71,122.32bps, before closing marginally below its opening figure at 71,008.70bps.
Market technicals were positive and mixed with a lower volume traded, 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 30% buy position and 70% sell volume. The total transaction volume index stood at 0.93 points, just as the momentum behind the day’s performance was strong, with Money Flow Index looking down to read 75.62pts, from the previous day’s 81.53pts, indicating that funds left the market.
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Index and Market Caps
At the end of Monday’s trading, the NGXASI, lost 101.29bps, closing at 71,008.70bps, from the 71,112.99bps opening level, representing a 0.15% dip. Market capitalization fell by N57.31bn, closing at N39.05tr, from the previous day’s N39.11tr, which also represented a 0.15% in value loss.
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The downturn was driven by profit taking in Stanbic IBTC, NB, Zenih Bank, Accesscorp, Transcorp, UBA, CWG and Caverton among others. This impacted mildly on Year-To-Date gain, reducing it to 38.55%, while Market Capitalization YTD gain stood at N10.84tr, representing a 39.89% rise above its opening level for the year.

Mixed Sector Indices
Sectoral performance indexes were mixed, as the NGX Insurance index closed higher by 0.50%, while NGX Banking led the decliners after losing 0.36%, followed by Consumer goods with 0.09%. Just as NGX Industrial goods and Energy finished flat.
Market breadth was positive as gainers outnumbered loser in the ratio of 34:15, while activities in volume and value terms were down, after investors exchanged 358.45m shares worth N4.36bn, driven by trades in Accesscorp, Aiico, Universal Insurance, Japaul Gold and Verita Kapital.
Multiverse and ABC Transport were the best performing stocks, gaining 9.92% and 9.88% respectively, closing at N3.99 and N0.89per share respectively, on market sentiment and forces. On the flip side, RT Briscoe and Prestige Assurance lost 9.84% and 9.09%, closing at N0.55 and N0.50per share, purely on the back of selloffs and profit taking.

Market Outlook
We expect mixed sentiment to continue as investors target dividend paying stocks and profit taking, in the midst of portfolio rebalancing on the strength of the better-than-expected corporate numbers released and high yields. As 2024 is setting up with dividend season ahead.
Meanwhile, all eyes are on the fiscal and monetary authorities to give direction of the government reforms and policies so far.

Take Action

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4. Real Estate Investment Opportunities in the Hyper-Inflationary Environment Of Today
5. Understanding Commodity Markets For Profitable Portfolio Diversification in 2024
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7. Manging Investment & Trading Risks: Using Technical Analysis/Indicators
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Ambrose Omordion
CRO|Investdata Consulting Ltd
Tel: 08028164085, 08179547605