Sentiment May Linger On More Corporate Earnings, Dividends Inflow, Amid  Portfolio Rebalancing 

Market Update for March 5

Tuesday’s trading activities on the Nigerian Exchange was yet another mixed session continuing its positive outing for the second day of the week on an above average traded volume, but negative market breadth as more corporate earnings poured with dividend announcements. This is coming ahead of midweek’s Treasury Bills’ Primary m\Market auction, with the Central Bank of Nigeria offering N337.89bn, after last week’s OMO auction was oversubscribed by 110.6% at a stop rate of 21%.

This higher rates/yields in the fixed income market continue to sustain pressure on the equity space, dampening the usual euphoria experienced at the peak of an earnings reporting season. Moreso, audited numbers released so far remain mixed and weak especially among manufacturing companies, reflecting the state of the economy, arising from foreign exchange hiccups which is putting pressure on companies operations and performance which had led to many reporting negative earnings, leaving zero reward for their shareholders.

The newly listed Transcorp Power and its parent continued to drive the positive performance, just as notifications for board meetings to approve 2023 audited financials, and insider dealings update by Geregu power.

Also, more companies presented their audited and quarterly reports, including Africa Prudential- full year audited account and Q2 numbers from Ellah Lakes Plc. These  scorecards were below market expectation, despite the 45 kobo dividend from Africa Prudential. Investors hope that the new Managing Director will bring on the much needed transformation in the company, especially at a time earnings power has remained weak over time.

The change in trend and momentum persists, as the index trades below the T-Line to gather more strength and surpass the support level that turned resistance as the index’s action remain on the decline phase. The current state of market create buy opportunities for position traders ahead of the release of more audited accounts. Market players should watch out for the value areas of resistance and support levels, as more earnings hit the market. The index’s action has displayed a mixed picture as all eyes are on companies’ earnings, following the optimism fueled by the belief that the impressive performance from the financial sector among others may impact the market positively.

Tuesday’s candlestick formation revealed reversal underway which still requires confirmation as trading opens this morning at the NGX.  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 index’s action is still relatively strong with RSI and bottom chart pattern that signaled possible reversal.

The momentum indicators signals a weakness in the market, as the ADX continues to look down at 35.48, while RSI and Money Flow Index were mixed to read 51.20 and 34.58 points against the previous session 50.02 and 35.22 points respectively.  The money flow index bearish divergence with the index action should be watch by players as they trade with caution because funds are still leaving the market. As trading volume pattern suggests hold and watch disposition of market players, as traders continue to reduce their position in some sectors in the face of others investment windows returns remain below inflation and deprecating naira.

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 on Monday  continue its oscillation, as it trades at $82.44 per barrel in the midst of weak global demand outlook, as the second world largest economy plan to reduce consumption. Just as Middle East conflict and that of Ukraine and Russia war persisted in the face of inflation resurfacing again.  The rising geopolitical tension across the globe is also a major threat to many economies and the commodity market. Also, OPEC left production cuts unchanged and other factors that impact oil price as it continued to oscillate. This trend may likely continue in 2024, this up and down movement that drive volatility.

Meanwhile, Tuesday’s trading started in the upside and was sustained for the rest of the session as investors and traders took position, selling off low, medium and large cap stocks. This pushed the NGX’s index to an intraday high of 99,192.82bps where it closed, from its lows of 98,376.48bps.

Market technicals for the session were weak and mixed, 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 100% buy position and 0% sell volume. The total transaction volume index stood at 0.88 points, just as impetus behind the day’s performance was relatively weak as Money Flow Index is looking down at 34.58pts, from the previous day’s 35.22pts, indicating that funds left the market, despite closing in green.

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Index and Market Caps

The NGXASI, at the end of  trading session, gained 344.93 basis points, closing at 99,190.46bps after opening at 98,847.89bps, representing a 0.35% up, just as market capitalization rose by N193.69, closing at N56.08tr from the previous day’s N55.89tr, which also represented a 0.35% value gain.

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 overbought range has just increased to 60 as they rallied to new highs that 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.

To become a member, send ‘YES’ or ‘STOCKS’ to the phone numbers below. Take advantage of this service to buy right and sell right at the current oscillating market in the midst of earnings season, portfolio reshuffling, and repositioning as we await an economic reform policy that can stimulate and re-track the economy to the path of growth and development.

The session upturn was driven by buying interest in the shares of Transcorp, Transcorp Power, FBNH, Zenith Bank, GTCO, TIP and Juli among others, which impacted mildly on Year-To-Date gain which inched up to 32.55%. Market capitalization YTD gain stood at N14.42 trillion, representing 37.26% above its opening level for the year.

Bearish Sector Indices

The sectoral performance indexes for the session were down, save for NGX Banking that closed higher by 1.14%, while NGX  Insurance  led the decliners after losing 3.23% followed by Consumer goods with 0.84%.  While NGX Energy and Industrial goods finished flat.

Market breadth was negative as losers outnumbered gainers in the ratio of 37:9, while activities in volume and value were mixed after investors exchanged 398.13m shares worth N31.79bn. Volume was driven by trades in, Transpower, Transcorp, UBA, Accesscorp and FBNH.

Transpower and Transcorp Plc were the best performing stocks, gaining 10% each, closing at N290.40 and N17.27 per share respectively on market forces and sentiment. On the flip side, Nascon and International Breweries lost 10% each, closing at N48.15 and N4.32per share, purely on profit taking and selloffs.

Market Outlook

We expect mixed sentiment to continue as more corporate earnings with dividend hits the market and players take advantage of low valuation 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.

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