NGX Investors Position On Pullbacks, Amid Dividend Investing, Concerns Over Banks’ Recapitalisation

Market Update for April 25
Finally, the corrective wave on the Nigerian Exchange slowed down on Thursday, amid buying sentiments in some major sectors as all eyes are on the expected inflow of Q1 earnings reports. It is evident that investors are position on the subsisting low valuation and mixed macroeconomic data and ahead of the 2024 Q1 GDP.
The NGX All-Share index inched up on a low traded volume but negative market breadth ahead of dividend qualification dates while income investors are taking advantage of pullbacks to position, with traders are looking forward to more Q1 numbers to reposition their portfolio, ahead of half year earnings, as they continued to digest the scorecards released so far.
This reversal signal is expected to create new entry opportunities for market players given the oversold state of the market and positive technical position as revealed by the bullish hammer formation at the end of Thursday trading session. Already, traders and investors are looking forward to these numbers as a game changer and unfolding happenings in the economy to further guide their investment decisions.
During the trading session and after, companies like Stanbic IBTC, Dangote Cement, McNichols and Mrs Oil Nigeria submitted impressive Q1 numbers with top and bottom lines in the green. These have given a hint as to where those companies are going, despite challenging economic situation, while the earnings reports from NCR Nigeria, Chams, Japaul Gold and Guinness Nigeria provided mixed numbers. Guinness Nigeria, for example, posted a negative Q3 earnings of N61.65 billion, just as the market, as expected, reacted to positive earnings report from Livestock Feeds showing a revenue and profit after tax growth of 47.21% and 774.26% respectively to N7.14bn and N181.19m. This translated to Earnings Per Share of six kobo.
These renewed buying sentiments and continued volatility are part of stock market dynamics that come with retracement after pullbacks or correction, despite the changes in market and economic fundamentals. This is happening amid the higher interest rate and yields in alternative investment windows in the face of mixed economic data and ongoing reform policies of the government. Also, market players have continued to digest recent macroeconomic reports and unfolding activities in the foreign exchange market with regard to how it impacts productivity level on the nation economy going forward and attraction of foreign inflow.
The NGX index’s action continued to trade below the T-line and 50-Day Moving Average, confirming the weak momentum while extending the decline phase, as the index witnessed another dip on above average traded volume and negative market internals to stay below the 8-day moving average exponential and 50 DMA to confirm continuation or reversal of trend depending on market forces and state of Q1 earnings reports of listed companies. As market players also look 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 declining oil production in the last months is a minus to the nation reserve.
Listed companies on the exchange continued to notify the investing public of their AGM meetings, as well as closed period and board meeting to approve unaudited Q1 2024 reports. The latest came from ETI, NGXGroup, FCMB, May/Baker and others, while Airtel Africa updates the market of its share buyback. Just as Ucap and The Initiates 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 mixed signal on the NGX that support reversal and continuation of trend, which needs to be confirmed as trading opens this morning. The market still remain weak on the buying sentiment as revealed by candlesticks formation and momentum indicators. The NGX is somewhat now, with the ADX looking up at 35.86, while RSI and Money Flow Index are down to read 28.67 and 9.10 points against the previous session 28.35 and 16.57 points respectively. Market players should watch this current trend and trade with caution after the index had signaled reversal in the face of funds leaving the market in a decline phase. Also, trading volume pattern remained mixed, to suggests wait and see in some sectors and selloffs in the face of others investment windows returns remain below inflation at 33.2% as Naira continues to look up in recent days.
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Oil price sustained uptrend on Thursday as it continues to oscillate, heading to record a weekly gain as it trades at $89.01 per barrel in the midst of weaken dollar and drop in US inventories, as investors looks to the state of global economies in the face of cooling 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, Thursday’s trading started slightly in the upside and it was sustained despite oscillating throughout the session on position taking in some stocks and profit booking. This situation pushed the NGX’s index to an intraday high of 98,183.94bps from its lows of 97,929.40bps, before closing marginally above its opening figure at 98,169.30bps.
Market technicals for the session were mixed and weak, as volume was lower compared to the previous session in the midst of breadth favoring the bears on a buying sentiment as revealed by Investdata’s Sentiments Report showing 94% buy position and 6% sell volume. The total transaction volume index stood at 0.68 points, just as energy behind the day’s performance was weak as Money Flow Index slide down to read 9.10pts, from the previous day’s 16.57pts, indicating that funds left the market, despite inching up in the green.
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Index and Market Caps
The composite NGX All-Share Index inched up by 48.00bps to 98,169.30bps after opening at 98,121.30bps, representing a 0.05% up, just as market capitalization rose by N26.64bn, closing at N55.52tr from the previous day’s N55.49tr, which also represented a 0.05% value gain.
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The upturn was driven by position taking in the shares of MTNN, Transcorp Hotel, UBA, Chams and Wapic among others. This impacted mildly on Year-To-Date gain which was up to 31.29%. Market capitalization YTD gain stood at N11.51tr, representing 35.68% above its opening level for the year.

Bearish Sector Indices
The sectoral performance indexes were down, save for the NGX Insurance that closed higher by 0.88%, while NGX Banking led the decliners after losing 1.10% followed Consumer goods with 0.05%. Just as NGX Industrial goods and Energy finished flat.
Market breadth was negative as losers outnumbered gainers in the ratio of 24:16, while activitiess in volume and value were down after investors exchanged 297.18m shares worth N6.52bn. Volume was driven by trades in Zenith Bank, Accesscorp, Transcorp, UBA and NB.
Transcorp Hotel and Livestock Feeds were the best performing stocks, gaining 9.75% and 9.42% closing at N96.50 and N1.51 per share respectively on market forces and improved earnings. On the flip side, SterlingNG and CWG lost 9.69% and 9.57%, closing at N3.82 and N5.20per share, purely on selloffs and profit taking.

Market Outlook
We expect mixed sentiments to continue in the face of dividend investing and concerns for new capital base for the banks as more corporate earnings 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