Due to the strong rates in the fixed-income market, investors in the equities market lost around N1.55 trillion in February.
The PUNCH recorded that, In the short- to medium-term, it is anticipated that investors would become less interested in the capital market as they pursue higher returns due to the increase in the monetary policy rate to 22.75 percent.
In February, the Nigerian Exchange began trading at 102,802.25 and N56.26 trillion for the All-Share Index and market capitalization, respectively. By the end of the month, it had dropped 2.75 percent to 99,980.30 and N54.71 trillion.
A broker and vice chairman of Highcap Securities, David Adonri, says that although the February decline was anticipated, further correction is anticipated following the release of the full-year results of listed businesses.
“The February 2024 stock market decline is not unexpected, notwithstanding the desperate attempts undertaken today to regain some of the ground lost. There will be further revisions because many listed firms’ full-year performance don’t support their high prices.
“Sentiment drove the prolonged rise that brought stocks down to terrifying heights. The time for judgement has arrived and when the full-year results become clear, fundamentals will take front stage,” he said.
He disclosed that a reduction of money moving to the capital market will follow the Monetary Policy Committee’s decision to boost rates, which he termed as a beneficial outcome in the short term.
Additionally, in order to calm the market and prevent risky bubble development that might hurt the economy, it is anticipated that the newly tightened monetary policy rate would decrease the amount of liquidity flowing to stocks, at least temporarily.
“In the end, issuers will be encouraged to access their funds from the primary market of the capital market by the credit squeeze that will result from the recent monetary policy rate hike,” said Adonri.
In their weekly market analysis, the experts at Cowry Asset Management Limited also predicted that the increase in the MPR would impede the flow of money into the stock market.
“We believe that rising yields in the fixed-income market and the high-interest environment brought on by the Central Bank of Nigeria’s recent policy rate hike to 22.75% will likely influence investor behaviour,” they said.
The local stock market had a notable weekly fall as the ASI fell 3.27 percent to 98,751.98 points.
Weaker-than-expected corporate results announcements and the start of the dividend earnings season, together with the fixed-income market’s higher yield forecast, significantly impacted market sentiment.
The market capitalization of listed stocks also fell by 3.27 percent every week to N54.04 trillion, giving investors a 32.07 percent year-to-date gain while suffering a weekly loss of N1.83 trillion.
The preceding week saw a dismal performance on all fronts, with the Insurance and Industrial Goods sectors suffering the most, down 3.40 and 3.87 percent, respectively, mostly due to Sunu Assurances, BUA Cement, and Lafarge.
Comparably, sell-offs in MTN Nigeria, Nestle, Eterna, and Fidelity Bank contributed significantly to the 2.6%, 1.5%, and 0.69 percent declines in the consumer goods, oil and gas, and banking sectors, respectively.
In 48,464 transactions throughout the week, 1.88 billion units of shares valued at N34.149 billion were swapped; this amount above the 1.377 billion units of shares valued at N31.584 billion that were traded in 42,040 deals the week before.
When it came to trading volume, the financial services sector led, accounting for 24,801 trades involving 1.275 billion units of shares valued at N20.427 billion. This sector contributed 67.78 percent and 59.82 percent, respectively, to the overall stock turnover volume and value.
The oil and gas business came in third with a turnover of 115.327 million shares worth N746.959m in 2,704 trades, followed by the conglomerates industry with 227.237 million shares worth N2.972bn in 3,351 deals.
Transnational Corporation Plc, United Bank for Africa Plc and Access Holdings Plc were the top three stocks in terms of volume traded. These three companies accounted for 563.139 million shares worth N10.155 billion that were traded in 9,270 deals, and they contributed 29.93 percent and 29.74 percent, respectively, to the total equity turnover volume and value.
During the week, Juli Plc, PZ Cussons, and Sterling Financial Holdings were among the gainers; they closed at N3.75, N33.75, and N5 after gaining 60.26 percent, 27.36 percent, and 14.94 percent, respectively.
MTN Nigeria dropped 18.91 percent to end at N200, Sunu Assurances lost 18.18 percent to close at N1.71, and Nestle Nigeria dropped 18.18 percent to conclude at N900 on the decliners’ list.
According to analyst projections, the market may rise this week as investors respond to the disclosed business activities and corporate earnings scorecards.
