Mixed Sentiments Yet As Investors Digest Earnings Reports, Inflow Reveal Value, Dividend Expectations

Market Update for January 23

Profit taking on the Nigerian Exchange moderated on Thursday in the midst of ongoing earnings reporting season and supplementary listing of additional shares of Lasaco Assurance that sustained the market capitalization, despite the slight decline in the benchmark NGX All-Share index which closed southward. More quarterly and full year unaudited scorecards were released to the market from University Press, Guinness Nigeria and Japaul Gold.

The numbers were impressive and signaled a hold, offering an insight into what market players should expect at the end of their financial year end. However, it is noteworthy that Japaul Gold’s performance for the Q4 and full year unaudited, beat expectation and give investors hope to hold their positions ahead of the new financial year performance.

The pullbacks in the face of distribution phase and low traded volume signaled a wait-and-see which is a sign of indecision ahead of expectations of more corporate earnings. The numbers released so far look good and are capable of supporting prices and attracting inflow to the market. The persisting low valuation creates opportunities for market players to buy into value and reposition their portfolios.

Also, the January trading patterns so far have given insights into what a company’s dividend will look like on the strength of the expected corporate numbers that just kicked-off.  Volatility will continued as the earnings season progresses, just as the mixed macroeconomic data and expected economic events would shape market sentiments for companies with December year-end.

The ongoing waves in the NGX are portfolio rebalancing-driven, just as profit taking in preparation for more scorecards inflow and dividend expectation in Q1 which is the peak of the earnings reporting season on the NGX. Also, dividend yield remains very important to players.

The NGX’s All-Share index has so far revealed pullbacks that supports an uptrend, as market players position in high yield dividend paying companies and growth stocks with higher upside potentials as a number of companies are hitting new 52-week highs. This is due to positive sentiments for some sectors, consolidation moves in some industries and expectations of positive corporate numbers from some others, based on their quarterly performance and history of dividend payouts.

During the session, Airtel Africa updated the market about its ongoing share buyback, while Chams and CAP informed the exchange of appointment of company secretary and Chief Financial Officer respectively.

Technically, money flow and other momentum tools were somewhat down, presenting buy opportunities for traders who understand the importance of buying low and selling high in any market condition in the midst ongoing volatility and buying sentiment. As the index pulled back to signal buy opportunities, thereby creating the perfect setup for high probability of continuation to catch New Year repositioning at the right price. Also, as the index trades below the T-line and above two moving averages of 50-EMA and 50-SMA, this indicates somehow indecision in the midst of changing market fundamentals and technicals on the NGX and the economy.

Also the NGX is currently in its distribution phase in the midst of decreasing traded volume, as candlestick formation and momentum indicators reveal somewhat correction in the market. ADX is looking down to read 38.29 points, while RSI and Money Flow Index were down at 55.50 and 60.99 points against the previous session’s 58.03 and 63.06 points respectively. Consequently, market players should watch this current trend and trade wisely in the face of funds leaving the market on a selling sentiment in some sectors and position taking in others on a daily time frame. Also, trading volume pattern continued to oscillates, suggesting wait and see in the market amid players revaluing the market and economic events in the face of policy direction of the government that look inconsistent.

To navigate the rest of Q1 and beyond profitably, it is important to run with economic events, fundamental and technical analysis, join investdata live sessions at noon every Monday, Wednesday and Friday’s trading session“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 pullbacks. Despite the oscillating volume of transaction witnessed in recent time, it is time to position in undervalued stocks, sectors and the next insider playing opportunity.

Oil prices pulled back further to continue its oscillation, trading at $78.29 per barrel in the midst of expected increase in US crude production and easing geopolitical tensions. Even as a delay to his tariff threats boosted bearish sentiment in the face drop in US crude inventories. OPEC project robust demand for oil in 2025 and 2026 in the face of ceasefire deal in the Middle East, while Russia and Ukraine war continue. As all eyes are on new tariff regime of Trump presidency.  The rising geopolitical uncertainties across many economies remains a threat to the global economy and energy consumption in 2025. This trend may likely continue, while the up and down movement continues to drive volatility, even as the raging war between Ukraine and Russia continues to influence global oil supply and demand.

Meanwhile, Thursday’s trading started on the downside and was sustained throughout the session, despite oscillating on profit taking in high cap stocks and positioning in others. This situation pushed the NGX’s index to an intra-day low of 102,788.20bps from its highs of 103,058.88bps, before closing below above its opening level at 102,788.20bps.

Market technicals were mixed and weak with lower volume when compared to the previous session in the midst of breadth at a par on a mixed sentiment as revealed by Investdata’s Sentiments Report showing 1% buy position and 99% sell volume. The total transaction volume index stood at 0.73 points, just as energy behind the day’s performance was relatively strong as Money Flow Index looks down to read 60.99pts, from the previous day’s 63.06pts, indicating that left the market.

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Index and Market Caps

At the end of Thursday trading, the  composite NGX All=Share Index slide by 48.15 basis points, closing at 102,788.20bps from 102,836.40bps, representing a 0.05% drop, while market capitalization fell by N0.29bn, at N63.15r from the previous day’s N63.15tr, representing a 0.05%  value loss.

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Thursday’s downturn was driven by profit taking in the shares of MTNN, Nascon, Dangote Sugar, NEM, Ikeja Hotel, Morison Industry, Sunu Assurance and C/I Leasing, among others. This impacted mildly on Year-To-Date gain as remained negative at 0.13%, while Market capitalization lost stood at N1.52tr, representing 0.61% increase over its opening level for the year.

Bearish Sector Indices

Sectoral performance indexes were down, save for NGX Banking indexes that closed 1.04% higher, while the NGX Insurance led the decliners after losing 1.23% followed by Consumer goods and Energy with 0.81% and 0.36% respectively. Just as NGX Industrial goods finished flat.

Market breadth was flat, as gainers were equal to losers in the ratio of 24:24, while activities in volume and value were mixed after investors exchanged 384.94 million shares worth N14.83bn. Volume was driven by trades in GTCO, UBA, Zenith Bank, Accesscorp and Jaiz Bank.

SCOA and Daarcom were the best performing stocks, gaining 9.76% and 9.09% respectively, closing at N3.60 and N0.84 per share respectively on the back of sentiment and market forces respectively. On the flip side, Morison and C/I Leasing lost 9.98% and 9.91% respectively, closing at N3.61 and N3.91per share, purely on selloff and profit taking.

Market Outlook

We expect mixed sentiments to continue as players digest corporate numbers and  more earnings reports hits the market to reveal value and give insight of dividend expectation,  while rebalancing their portfolios midst high inflation and earnings expectations. Also, sector rotation and portfolio rebalancing continued in the market with investors taking advantage of price correction to buy into value.

This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, 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

info@investdata.com.ng

ambrose.o@investdataonline.com

ambroseconsultants@yahoo.com

08028164085