Mixed Trends Ahead Yet, Amidst Full-Year Earnings Inflow, As Investors Target Dividend Stocks
Market Update for March 13
Profit taking and selloffs continued on the Nigerian Exchange on Monday to open the week of the nation’s governorship elections on negative note, as the benchmark NGX All-Share index closed slight lower on a less than average traded volume and negative market breadth that extended the ranging in the second consecutive session of bear transition.
The market correction or pullback seems to be lingering ahead of corporate actions dates when prices are adjusted for dividend declared by companies which had recently released their numbers, ahead of some that are yet to make their audited 2022 full year results available. This is expected to drive and impact market volatility which will create opportunity for players to take position and benefit from companies’ payouts and capital gain.
Selling pressure as a result of the contagious fear of global events depressed the market on Monday with many stocks suffering losses, especially the financial services companies, even as all eyes are on the February consumer price index and midweek Treasury Bill’s primary market auction, after adjusting rates up in the previous week offer to 1.44%, 6% and 10% respectively for 91days, 182days and 364 days’ tenors with oversubscription at the end of the offer, a situation that is putting pressure on equity market. Also, plans by the Central Bank of Nigeria (CBN) to raise trillions in this second quarter 2023, may lead to a further spike in stock market volatility.
Already, many companies have notified investors of their board meetings to approve audited result and recommend dividend for the period, after the unaudited accounts have given investors an insight into what will likely be released as dividend, following which such results should hit the market any moment before the month end.
With the election season gradually winding down this weekend, it is expected that political uncertainties and fear will reduce, since the continuity that supports investment inflow is being built in the midst of an earnings reporting season. As such, it expected that traders and investors will continue to play the market, waiting for the release of more audited results, a situation likely to drive equity prices up and down. Also, it is expected that dividend adjustments and other corporate actions will support oscillation that will create new entrance for market players, especially traders in the post dividend adjustment period which is expected to support positive trend in Q2 all things being equal.
The NGX All-Share index is still heading for the 56,000 basis points mark, while trading slightly above the T line after testing it on a strong momentum, amid repositioning in some companies and sectors expected to declare dividends between now and March 31, 2023. The actual state of these audited financials will give a clear direction, just as it may support the continuation of this recovery in the new month, notwithstanding uncertainties associated with the 2023 general elections.
Technically, the NGX index’s action is on a distribution phase which may support a pullback, after forming a cup and handle chart pattern on the daily and weekly time frame. This signals a bearish divergence between the index action and MACD on a dally chart that supports correction. Let us keep our gaze on market forces and money flow which is looking up.
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Oil price oscillation continued, pulling back to trade below $80, at $78.85per barrel, as drop in oil and gas price may save the global economy in the face of slow economic recovery in China and likely rates normalization by the Feds in nearest future. Also, the attack on Ukraine is rising even when China is calling for peace and a ceasefire. This geopolitical tension, the prevailing high interest rate regime and soaring inflation across the globe remain potent threat to world peace. Also, supply tightened due to the Russia-Ukraine war that entered into it is first year last week. The up and down movement of oil price also continues to drive volatility across markets.
Monday’s trading started on the upside, but pulled back by the afternoon after much oscillating on buying interests in highly priced stocks and profit taking especially in banking and insurance stocks, a situation that pushed the NGXASI to an intraday low of 55,788.37 basis points from its highs of 55,926,89bps, before closing slightly below its opening figure at 55,788.37bps.
Market technicals were negative and mixed with higher volume of trade, 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 0% buy position and 100% sell volume. The total transaction volume index stood at 0.66 points, just as energy behind the day’s performance was strong going by Money Flow Index at 72.246pts, from the previous day’s 71.65pts, indicating that funds entered the market, despite sliding down.
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Index and Market Caps
The composite NGXASI, at the end of trading slipped by a marginal 6.14 basis points, closing at 55,788.37bps, after opening at 55,794.51bps, representing a 0.01% drop, just as market capitalization fell by N3.34bn to N30.391tr, from the previous day’s N30.395tr, which also represented a 0.01% value loss.
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Meanwhile, Monday’s downturn was driven by selloffs in the shares of NGXGroup, NPF Microfinance, Zenith Bank, Oando, NEM, Sterling Bank and Linkage Assurance among others, which impacted mildly on Year-To-Date gain to 8.85%. Market capitalization YTD gain increased by N2.68tr, representing 8.86% above its opening level for the year.
Bearish Sector Indices
Sectorial performance indexes were down, except for the NGX Consumer Goods which closed 1.82% higher, while the NGX Banking led the decliners, after losing 1.64%, followed by Insurance and Industrial goods with 0.71% and 0.08% respectively. Just as NGX Oil/Gas closed flat.
Market breadth was negative, as losers outnumbered gainers in the ratio of 21:12, while transactions in volume and value were mixed after investors exchanged 179.03m shares worth N2.55bn. Volume was driven by trades in NGX Group, Transcorp, Sterling Bank, Zenith Bank and UBA.
University Press and CWG were the best performing stocks, gaining 9.89% and 7.69% respectively, closing at N2.00 and N0.98 per share respectively on market forces. On the flip side, NGXGroup and NPF Microfinance lost 9.72% AND 8.47% respectively, closing at N26.00 and N1.73 per share, purely on selloffs and profit taking.
We expect the mixed sentiments and trend to continue as players expect more earnings reports in the midst price markdown for dividend. Income investors target dividend paying companies and defensive stocks to protect their portfolios ahead of the governorship election and post dividend adjustment. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
Q2 2023 Investdata Master Class
Theme: Post-Election Investment Opportunities For Consistent Profits In 2023
1. Nigeria: Post-Election Investment Opportunities In Sectors/Industries, Mr Abiola Rasaq, Head Corporate Strategy at CSCS Plc
2. Managing Trade & Investment Risks In A Post-Election Year Using Technical Analysis Tools, Mr Abdul-Rasheed Oshoma Momoh, Head Capital Market at, TRW Stockbrokers Ltd
3. How To Prepare Ahead Of Policy Shifts By Incoming Administration, Alhaji Garba Kurfi MD/CEO APT Securities & Funds Ltd
4. Identifying Changing Post-Election Trends/Patterns For Enhanced Trading Returns, , Mr Ambrose Omordion, CRO. Investdata Consulting Ltd.
This volatile market is not going away any time soon. We have not seen many times like this, since our democratic government started in 1999, especially as the general elections and the post-COVID 19 era have changed the market’s holding structure with domestic investors taking the lead, a situation that has supported today’s trends and patterns. So it is more important than ever to have the best tools and knowledge to benefit most out of this cycle, as the post-election environment once again creates opportunities for money-making moves. That is why I am excited to share something New and Unique in the Q2 Master Class.
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H. 5 Stocks to beat inflation in 2023
“Q2 Master Class 2023 connects you to post-election trade opportunities and ideas to enhance your trading profits
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