Investors Dump Equities Amid Anxieties Over CBN’s Rate Call
Nigerian equities closed at the weekend with a net loss of N604 billion as anxieties over the likely decisions of the Central Bank of Nigeria (CBN) on benchmark interest rate and other monetary policy tools fuelled a sell-off at the stock market.
The Monetary Policy Committee (MPC) of the CBN is scheduled to hold its third meeting in the year between today and Tuesday, May 25, 2021.
Analysts were divided on the possible decisions at the end of the two-day meeting. While some analysts saw possible increase of the benchmark Monetary Policy Rate (MPR) from 11.50 per cent to between 12.00 per cent and 12.50 per cent, other analysts expected the apex bank to hold its rate at 11.50 per cent.
The benchmark index for Nigerian equities, the All Share Index (ASI) of the Nigerian Exchange (NGX) Limited, closed weekend with average decline of 2.93 per cent for the five-day trading, equivalent to net capital depreciation of N604 billion. The decline was mainly due to depreciation in share prices. The negative return for the week worsened the negative average year-to-date return to -4.83 per cent.
Analysts were unanimous that transactions at the equities market were largely driven by portfolio rebalancing due to expectations of the MPC decisions, first quarter data on the economy, particularly the Gross Domestic Product (GDP), which is scheduled to be published this week and a streak of profit-taking activities.
“In the week ahead, we believe investors will be focused on the outcome of the highly anticipated MPC meeting to gain further clarity on the movement of yields in the fixed income market. Consequently, we see more of a “choppy theme” as cautious trading dominates the market,” Cordros Group stated.
Aggregate market value of quoted equities at the NGX dropped from its week’s opening value of N20.579 trillion to close weekend at N19.975 trillion, representing a drop of N604 billion. The ASI also declined simultaneously from its opening index of 39,481.89 points to close at the weekend at 38,324.07 points.
With nearly two decliners for every advancer, the overall negative outlook was driven by considerable selloffs across most sectors of the market. All sectoral indices closed negative with the exception of the NGX Oil and Gas Index, which appreciated by 7.39 per cent. The NGX 30 Index, which tracks the 30 largest quoted companies at the NGX, dropped by 1.48 per cent. The NGX Banking Index declined by 1.53 per cent. The NGX Main Board Index, which tracks all equities on NGX’s largest and primary board, depreciated by 4.28 per cent. The NGX Premium Board, which tracks some high-rated stocks, dropped by 1.27 per cent. The NGX Insurance Index dipped by 0.74 per cent. The NGX Consumer Goods Index slipped by 0.03 per cent while the NGX Industrial Goods Index recorded the highest sectoral loss of 3.34 per cent.
Analysts at Cowry Asset Management Limited said foreign portfolio investors, whose trading characteristically influences the stock market, appeared not to be responding immediately to the devaluation of naira against the dollar.
“In the new week, we expect the domestic bourse to trade sideways as investors stay on the sidelines to digest first quarter GDP figures to be released in the new week,” Cowry Asset stated.
Analysts at Afrinvest Securities said they expected “the bearish sentiment to continue in the absence of any positive catalyst”.
Total turnover at the NGX stood at 1.05 billion shares worth N11.54 billion in 17,233 deals as against a total of 840.33 million shares valued at N9.56 billion traded in 13,239 deals two weeks ago.
The financial services sector led the activity chart with 674.74 million shares valued at N5.59 billion in 9,405 deals; representing 64.41 per cent and 48.42 per cent of the total equity turnover volume and value.
The conglomerates sector followed with 94.52 million shares worth N630.37 million in 828 deals while the information and communication technology (ICT) sector placed third with a turnover of 87.14 million shares worth N630.90 million in 539 deals.
Banking stocks continued to dominate activities chart with the trio of Zenith Bank Plc, FBN Holdings Plc and Fidelity Bank Plc leading as three most active stocks, with a turnover of 248.27 million shares worth N3.29 billion in 2,988 deals, representing 23.70 per cent and 28.49 per cent of the total equity turnover volume and value respectively.
Also, a total of 5,646 units of Exchange Traded Funds valued at N623,224 were traded in 14 deals compared with a total of 14,477 units valued at N258,796 traded in four deals penultimate week.
At the debt market, a total of 80,998 units of federal government bonds valued at N81.944 million were traded in 22 deals compared with a total of 151,345 units valued at N157.944 million traded in 75 deals two weeks ago.
Further price movement analysis showed that there were 41 losers against 26 gainers last week compared with 19 losers and 33 gainers recorded in the previous week. C & I Leasing led the losers, in terms of percentage, with a drop of 18.8 per cent to close at N4.06 per share. Royal Exchange followed with a loss of 18.42 per cent to close at 62 kobo. Linkage Assurance declined by 13.04 per cent to 60 kobo. Sunu Assurances Nigeria dropped by 12.96 per cent to close at 47 kobo while Airtel Africa dipped by 10 per cent to close at N837 per share.
On the positive side, Eterna led the gainers with a gain of 21.21 per cent to close at N8 per share. Prestige Assurance followed with a gain 15.22 per cent to close at 53 kobo. Sterling Bank rose by 12.84 per cent to close at N1.67. MRS Oil Nigeria appreciated by 11.01 per cent to close at N12.10. Associated Bus Company rose by 10.81 per cent to close at 41 kobo while The Initiates, Seplat Petroleum Development Company and Mutual Benefits Assurance chalked up 10 per cent each to close at 44 kobo, N682 and 44 kobo respectively.
