Naira Notes Crunch Drags Down Stock Market

The bullish sentiment in the equities market which started previous week has been aborted at the backdrop of the prolonged cash crunch emanating from the Central Bank of Nigeria, CBN’s, currency change exercise.

Market operators indicated that the bullish run expected on the backdrop of corporate earnings announcements may be diminished as the currency crises lingers.

Analysts also expect mixed sentiments to continue this week as market players digest January Consumer Price Index, CPI, data in the midst of corporate earnings expectation, portfolio rebalancing, falling rates and anxiety over the election uncertainty.

Meanwhile, market analysis showed that the loss recorded on the final trading day, Friday was 1.3% which was sufficient to wipe out the cumulative gains of 0.4% as of Thursday.

Consequently, the NGX All-Share Index shed 1.0% Week on Week, W/W, to close at 5.0% Year to Date, YtD.

Analysing activity levels, trading volume, and value decreased by 20.1% W/W and 22.3% W/W, respectively.

Across sectors, the Insurance Index up 1.2%, Oil and Gas Index 0.9%, Consumer Goods Index, 0.7% and Industrial Goods Index 0.1% while the Banking Index declined by 1.3%.

Commenting on market performance, analysts at Cordros Research said:”

In the week ahead, we believe investors will be caught between two opposing forces ranging from uncertainties ahead of the nation’s presidential election, and the release of 2022 full year corporate earnings with accompanying dividend declarations. Consequently, we expect more of a choppy theme as cautious trading takes center stage ahead of the 2023 general elections scheduled to hold later in the week. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.

Commenting on market outlook, analysts at InvestData Consulting Limited said: “We expect mixed and positive sentiments to continue as market players digest January CPI data in the midst of corporate earnings expectation, portfolio rebalancing, falling rates and anxiety over the election uncertainty. Any pullback at this point may 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.”