• Tuesday, March 05, 2024
businessday logo


Bearish sentiments trail Nigerian equities


Despite a positive take-off this week at the Nigerian stock market, the possibility of reversing the loss of 1.22 percent recorded last week by equity investors still remains in doubt.

As the bears reigned supreme at the Nigerian Stock Exchange (NSE), week-on-week (WoW) the stock market recorded new lows and achieved a month-to-date (MtD) loss of 5.61 percent, and Year-to-Date (YtD) loss of 7.34 percent.

While many analysts see the recent sell-off resulting from suspension of Central Bank of Nigeria’s (CBN) governor, Sanusi Lamido Sanusi, as an opportunity for bargain hunters to swoop on beat-down value stocks, others still believe that the bearish sentiment still trails the market.

The stock market recorded a turnover of 6.973 billion shares worth N24.439 billion in 27,633 deals by investors on the floor of the Exchange in contrast with a total of 1.918 billion shares valued at N25.134 billion that exchanged hands the preceding week in 25,346 deals.

“Improved market liquidity largely driven from statutory allocation was unable to boost market confidence as sell pressure increased. This week, sell activities may maintain current momentum as investors remain pessimistic and cautious about market directions,” according to market analysts at Access Bank plc.

At the stock market last week, the Financial Services Industry (measured by volume) led the activity chart with 6.587 billion shares valued at N18.160 billion traded in 16,800 deals; thus contributing 94.46 percent and 74.31 percent to the total equity turnover volume and value, respectively.

The Conglomerates Industry followed with a turnover of 137.850 million shares worth N815.029 million in 1,449 deals. The third place was occupied by the Consumer Goods Industry with 77.493 million shares worth N3.376 billion in 4,014 deals.

Trading in the top three equities namely, Oasis Insurance plc, Zenith International Bank plc, and Access Bank plc (measured by volume) accounted for 5.038 billion shares worth N8.227 billion in 3,053 deals, contributing 72.25 percent and 33.66 percent to the total equity turnover volume and value, respectively.

Also traded were a total of 641 units of NewGold Exchange Traded Funds (ETFs) valued at N1.343 million executed in 6 deals compared with a total of 225 units of NewGold valued at N459, 220 transacted last week in 6 deals. Similarly, 100 units of FGN bonds valued at N113, 286.73 were last week traded in 1 deal compared with a total of 600 units of FGN bonds valued at N663, 189.87 transacted the preceding week in 7 deals.

“Investors (especially the foreign investors) considered the implication of Sanusi’s suspension on exchange rate stability, inflation and the general administration of monetary policy, considering that Sanusi has achieved remarkable stability on both inflation and exchange rate. This resulted in wide spread panic sales,” said Morgan Capital analysts.

These analysts noted anticipation of further hike in Cash Reserve Ratio (CRR) for public sector deposit has also heightened the negative sentiments of investors towards banking stocks, which has seen bank stocks trade at very low P/E multiples considering the expected reduction in interest earnings capacity the hike would have triggered.

“However, following the suspension of the CBN governor, we think that the plan to further hike CRR will be shelved as the interim CBN governor may not want to upset status quo and allow the soon to be constituted monetary policy committee (MPC) to take the major decisions and also for the political undertone that a loosened monetary policy rate supports,” the analysts at Morgan Capital noted.

“We expect market to recover mid-week as local investors buy into the bottom,” said analysts at UBA Capital, who noted that Sanusi’s suspension heightened foreign investors’ concern.

By:  Iheanyi Nwachukwu