• Friday, March 29, 2024
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BusinessDay

No respite for investors as stocks slump for third straight session in week


Stocks

Stocks continued their descent on Wednesday, recording their second-biggest decline in 2020 to widen year’s loss by the most yet.

The most capitalised stock, Dangote Cement, shed 10 percent to N153 a unit after remaining relatively quiet in the previous market routs, pushing the market 3.35 percent lower and YTD to -12.18 percent.

Stock investors have now lost over N1trn since Monday.

The cement maker makes up about 21 percent of the entire stock market.

Despite the downturn in the market, banking stocks saw relatively strong bids for the first time this week as stocks “fall to very attractive levels enough to compensate for risks”, said Gbolahan Ologunro, an analyst at Lagos-based CSL Stockbrokers Ltd.

Ologunro said live trade data suggest movement in Dangote Cement share price might have been due to the activity of a single unnamed investor.

Nestle, United Capital and Oando were among the laggards in the day.

However, 18 stocks were up in the day, the highest number of gainers since the start of trading this week, while the insurance index gained out of five other major sectoral indices tracked by BusinessDay.

Brent reversed gains in the day after initially crossing $39 per barrel as Russia indicated its door was open to Saudi Arabia and OPEC+ amid rifts between the big oil producers over production cuts.

But for Nigeria, the concerns have become multi-layered as oil below the country’s budget benchmark and the Central Bank of Nigeria’s preferred minimum has caused panic in the market with foreign investors fleeing and Nigerians swapping naira for dollars amid fears of a currency devaluation.

Banks on Wednesday quoted a dollar at N390 amid a surge in demand while traders on the black market were unable to meet demand.

Already, President Muhammadu Buhari has asked both the monetary and fiscal heads to meet alongside key officials to assess the impact of the coronavirus and oil decline on the economy.

Finance Minister Zainab Ahmed has indicated that the budget could be revised downwards. Analysts say it is the much-needed capital expenditure that would suffer.

Meanwhile, the IMF has downgraded Nigeria’s 2020 growth to 2 percent, a slowdown from 2019’s 2.27 percent – even IMF’s revision had come before oil price plunged by the most since 1991.

But investors are not jumping into the fixed income space, said Ologunro. “They are adopting a wait-and-see approach to see if the government would borrow locally or internationally as current budget deficit worsens on oil downturn.”

On the shorter segment of the yield curve, investors bid 13.2X, 2X, and 2.6X the amount offered by the CBN across the 91-day, 182-day and 364-day each in Wednesday’s NTB Primary Market Auction.

The CBN had sought to raise as much as N86.3bn in the auction that saw rates dip across all tenors.

The 364-day bill closed lower at 5.3 percent from a previous level of 5.7 percent while 91-day and 182-day fell to 2.49 percent and 3.78 percent from 3 percent and 4 percent each.

The naira depreciated by 1.4 percent to NGN367.00/USD in the parallel market and by 0.4 percent to NGN366.71/USD at the I&E FX window, according to analysts at Cordros Securities.

Cordros noted that trading in the NTB secondary market was quiet as investors shifted focus towards the NTB PMA.

However, average yield expanded in the OMO secondary market by 34bps to 15.2 percent as foreign investors continued to sell off short-dated instruments 3.00 percent, 3.78 percent (previously 4.00 percent), and 5.30 percent (previously 5.70 percent), the analysts said.

SEGUN ADAMS