Mixed Sentiments Yet On Dividend Investing, As Investors React To Q1 Earnings, Bet On Insurance Earnings

Market Update for May 6

It was a mixed session, once again, on the Nigerian Exchange on Monday, as the bears resurfaced, starting the week on negative note. This followed selloffs in Airtel Africa, as it continues its share buy-back programme, amid profit taking in other stocks both of which combined to weigh down the composite NGX All-Share index pulling lower on an above average traded volume in midst of a positive market breadth and selling sentiment. Monday’s pullback halted three consecutive sessions of bull transition, as market players reacted to the mixed corporate earnings released so far, amid bargain hunting, dividend qualification dates and expectation of insurance company’s scorecards.

We expect the renewed buying interests in the equity space to continue on the back of reactions to Q1 earnings reports and portfolio rebalancing. As market players are digesting these earnings and positioning in fundamentally sound stocks at these current low prices and inflow of funds from dividend income as payment and AGM meeting dates announced by various companies are in this month of May.

Already, the pending 2023 audited accounts from banks are being made available to the market, alongside first quarter corporate earnings majority of which are impressive and beat expectations. The full-year result that emanated from Ecobank Transnational Incorporated was modest and mixed, with flat top and bottom-lines, as investors expect dividend recommendation from the board. Also, there were remarkable Q1 numbers from banks and other companies, irrespective of the nation’s economic headwinds that resulting from the ongoing reforms and policy implementations of economic managers.

The pullback has however created new entry opportunities for market players, given the oversold state of the market and mixed technical position as revealed by the topping chart pattern  at the end of Monday’s session which signals the onset of a reversal of trend or continuation that needs to be confirm as trading opens Tuesday. Already, the Q1 numbers are the game changer and unfolding happenings in the economy to further give insight and guide player’s decisions.

The NGX index’s action pulled back to trade below the T-line and 50-Day Moving Average slightly, confirming the weight of highly priced stocks in the market and mixed momentum, as the index slide down on a high traded volume and 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, even with the continued mismatch of policies and implementation style. As oscillating oil production output.

More companies on the exchange continued to notify the investing public of their AGM and board meetings. The latest came from Mrs Oil Nigeria, Flourmill Nigeria, IEI and others, while The Initiates Plc informed the market of its 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, there is a reversal signal on the NGX that supports downtrend, as the market still remains somewhat on a selling sentiment as revealed by candlesticks formation and momentum indicators. As ADX is looking down at 37.52, while RSI and Money Flow Index are down to read 38.45 and 41.61 points against the previous session 43.53 and 48.68 points respectively.  Market players should watch this current trend and trade with caution after the index had signaled reversal in the face of funds entering the market slowing down. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and buying interest in the face of a distributing market.

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 was flat on Monday, as it continues its oscillation to trade at $83.33 per barrel in the midst of negotiators still unable to reach ceasefire agreement between Hamas and Israel. As supply risk in the face weak global demand, as investors looks to the state of global economies in the face of 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.

Meanwhile, Monday’s trading opened in the green and was sustained till afternoon session before pulling back on selloffs and profit taking in some stocks, especially Airtel and others. This situation pushed the NGX’s index to an intraday low of 98,703.68bps from its highs of 100,437.69bps, before closing below its opening figure at 98,703.68bps.

Market technicals for the session were mixed and weak, 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 0% buy position and 100% sell volume. The total transaction volume index stood at 0.93 points, just as impetus behind the day’s performance was  relatively weak as Money Flow Index slide to read  41.61pts, from the previous day’s 48.68pts, indicating that funds left the market.

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Index and Market Caps

At the end of Monday trading, the benchmark NGX All-Share Index, shed 883.57bps to 98,703.68bps after opening at 99,587.25bps, representing a 0.89% decline, just as market capitalization fell by N499.70bn, closing at N55.82tr from the previous day’s N56.32tr, which also represented a 0.89% value loss.

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.

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The downturn was driven by profit booking and selloffs in the shares of Airtel, Stanbic IBTC, Transcorp, Berger Paints, NB and Ucap among others. This impacted negatively on Year-To-Date gain which increased to 32.00%. Market capitalization YTD gain stood at N11.52tr, representing 37.08% above its opening level for the year.

Bullish Sector Indices

The sectoral performance indexes were in green, save for NGX Oil/Gas that closed flat, while the NGX Banking index led  the advancers after gaining  2.56%, followed by Insurance, Consumer and Industrial goods with 2.03%, 0.58% and 0.25% respectively.

Market breadth was positive as gainers outnumbered losers in the ratio of 38:18, while transactions in volume and value were mixed after investors exchanged 421.73m shares worth N8.95bn. Volume was driven by trades in Accesscorp, UBA, GTCO, Universal Insurance and Zenith Bank.

Cornerstone Insurance and Guinea Insurance were the best performing stocks, gaining 10% each, closing at N1.98 and N0.33 per share respectively on market forces and expected earnings. On the flip side, Airtel and Berger Paints lost 10% and 9.85% respectively, closing at N1,980 and N12.35per share, purely on selloffs and profit taking.

Market Outlook

We expect mixed sentiments to continue in the face of dividend investing and reaction to Q1 numbers as Insurance corporate earnings are 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