NGX: Bear Sentiments Yet, Amid Positioning For Dividend, Pullbacks, Price Corrections

Market Update for April 4

The bearish trend and momentum on the Nigerian Exchange continued on Thursday as more banks released their audited accounts with corporate actions, amid the ongoing sector rotation on the strength of emerging numbers from quoted companies and policy direction of the government. The composite NGX All-Share index closed lower on a very high traded volume, extending the negative outing of the new trading quarter for the third consecutive session of the week in the face of negative market and selling sentiments.

Meanwhile, Stanbic IBTC and Wema Bank presented their audited scorecards for the financial year ended December 31, 2023 with impressive numbers but relatively low payout compared to their earnings and share prices. Stanbic IBTC’s earnings and profit level rose by 62% and 74% respectively to N461.09bn and N140.62bn in 2023. This translated to earnings per share of N10.62 and a final dividend of N2.20. Wema Bank’s numbers beat expectation, posting a top-line of N226.91 billion in 2023 against N133.05 billion in 2022 and bottom line of N35.99 billion compared to N11.35 billion recorded in 2022. This produced EPS of N2.80 and dividend of 50 kobo for its shareholders.

Market players continued to digest and study the mixed corporate earnings and macroeconomic numbers which reveal the state of the economy and impact of the ongoing government policies. All eyes are on March inflation data and Q1 2024 financial reports to give more insight were the economy is heading. Today, the nation’s inflation is at its 28-year high, while interest rate reached its historic peak, pointing to the possibility of an economic contraction as the market await Q1 2024 GDP. However, relative stability has returned to the foreign exchange market in the aftermath of the latest intervention by the Central Bank of Nigeria by clearing FX backlogs. This had led to the recent appreciation in the value of the Naira against the US Dollar.

The NGX index’s action breakdown the T line to confirmed weak momentum at the stage of distribution phase, heading a decline and correction on a high traded volume as witnessed at the end of the Thursday trading, just as this trend is likely to continue which needs confirmation depending on market forces as  Friday trading opens. 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. It does seem that monetary authorities has sacrificed the economy on the altar of attracting foreign inflows with the increasing interest rate for improved foreign exchange supply that will help address FX challenges and checkmate inflation. Already, the CBN says it has cleared all genuine FX backlogs, which is why the Naira has started appreciating, just as external reserves is looking up after many months of decline. We can only hope that this will support productivity and attract foreign investors.

Companies closed period and board meetings notification to approve unaudited Q1 2024 reports continue on the exchange, as the latest came from Living Trust Mortgage Bank. Eterna announced the appointment a new Managing Director, while Airtel Africa updated the market on the ongoing share buyback, even as Dangote Cement announced a change in its AGM and payment dates. 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 NGX is relatively weak as selling sentiment persists as revealed by candlesticks formation and momentum indicators. This indicate weakness in the market, as ADX is looking down at 34.72, while RSI and Money Flow Index are also declining to read 57.21and 53.97points against the previous session 60.54 and 61.86 points respectively.  Market players should watch this change in trend and trade with caution after the index had formed a top pattern and momentum is becoming weaker since after Easter holidays. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and profit taking in the face of others investment windows returns remain below inflation as Naira continues to look up in recent days.

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Oil price on Thursday jump to six months high to continue its oscillation, as it trade above  $90 per barrel in the midst of OPEC sustaining its production cuts after ministerial meeting  and escalating  geopolitical tensions in the Middle East as Iran threaten military action on Israel. Even as US crude inventories rose. The rising 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.

Thursday’s trading opened in the downside and was sustained throughout the session, despite oscillating on profit taking in banking stocks and others, a situation that pushed the NGX’s index to an intraday low of 103,736.09bps from its highs of 104,181.30bps, before closing below its opening figure at 103,736.09bps.

Market technicals for the session were negative and mixed, as volume was higher 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 1.26 points, just as impetus behind the day’s performance was relatively weak as Money Flow Index is looking down to read 53.97pts, from the previous day’s 61.86pts, indicating that funds left  the market.

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Index and Market Caps

The benchmark NGX All-Share Index, at the end of Thursday trading shed   445.24bps, closing at 103,736.08bps after opening at 104,181.32bps, representing a 0.43% decline, just as market capitalization fell by N251.75bn, closing at N58.65tr from the previous day’s N58.91tr, which also represented a 0.43% value loss.

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The session downturn was driven by profit taking in the shares of MTNN, GTCO, FBNH, Unilever, UBA, Accesscorp, Ucap, Zenith Bank, Wapco and Unity Bank among others, which impacted negatively on Year-To-Date gain which reduced to 38.73%. Market capitalization YTD gain stood at N13.94trillion, representing 40.44% above its opening level for the year.

Mixed Sector Indices

The sectoral performance indexes were mixed, with the NGX Consumer and Insuarnce closing 0.46% and 0.43% higher respectively, while the NGX Banking led the decliners after losing 2.67%, followed by Industrial goods with 0.09%. Just as NGX Energy finished flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 26:22, while activities in volume and value were up after investors exchanged 487.73m shares worth N15.64bn. Volume was driven by trades in Zenith Bank, GTCO, UBA Accesscorp and Transcorp.

Morison Industries and SCOA were the best performing stocks, gaining 9.84% and 9.77% closing at N2.12 and N2.36per share respectively on market forces and sentiment. On the flip side, C & I Leasing and Mutual Benefits Assurance lost 9.79% and 8.57% respectively, closing at N3.50 and N0.64 per share, purely on selloffs and profit taking.

Market Outlook

We expect a mixed and bearish sentiment in the midst positioning and profit taking as players digest the corporate earnings inflow 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