Cautious investors drive choppy buys at stock market

Amid mixed feelings that permeate the Nigerian stock market earlier this week, the bourse ended its three trading days of this week with investors playing more of the jerky deal.

Though, having navigated the waves of fear that heightened recently over possible impact of the JP Morgan decision on foreign inflow into naira assets, many investors further took the path of caution in anticipation of the Nigeria’s MPC outcome.

In line with most analysts’ view, the Nigerian bourse which witnessed sustained buy pressure last week due to buy opportunities in some value stocks that prompted bargain activities recorded a mix of sell off and bargain this week.

Nigerian stock market started this week on a negative note followed by increased buy decision which erased market’s two-day loss.  This week stock trading at the NSE was for only three days as the Federal Government declared Thursday (today) and tomorrow (Friday) public holidays to celebrate the Eid-El-Kabir.

“This week, performance gauges may trend downwards as profit-taking sentiment takes hold,” according to financial analysts at Access Bank plc.

The value of listed Nigerian equities increased by about N220 billion at the close of deals last week due to sustained bargain hunting on the local bourse as government policy outlook looked clearer and stock valuation remained attractive.

The Nigerian Stock Exchange (NSE) benchmark performance indicator –the All Share Index (ASI) rose by 643.6 points or 2.17 percent last week from a week open level of 29,689.08 points to 30,332.68 points at the close of transactions on the bourse Friday.

Likewise, the market capitalisation of Nigerian equities increased to N10.424trillion from N10.204trillion at the beginning of trading last week. Last Friday, equity traders in 3,292 deals exchanged 333,434,298 units valued N3.511billion.

Research analysts at United Capital plc expected the stock market to be relatively calm as investors awaited the outcome of the MPC meeting.

Nigeria’s Monetary Policy Committee (MPC) met this week (September 21 and 22) and reviewed domestic and international economic conditions in order to determine the policy direction for the next two months.

In consideration of the underlying fundamentals of the economy, particularly the declining output growth, rising unemployment, evolving international economic environment as well as the need to properly position the economy on a sustainable growth path, the MPC decided by a vote of seven to reduce the Cash Reserve Requirement (CRR) from 31 percent to 25 percent while three voted to hold.

By a unanimous vote, the MPC voted to retain the Monetary Policy Rate (MPR) at 13 percent. The MPC took decisions which were in line with many analysts expectation. Liquidity ratio was retained at 30percent; and the Cash Reserve Ratio (CRR) was reduced to 25percent (before it was 31percent).

“We think the cautious approach and locking-in on profit will offset the expected demand in the short week. On this note, we think the market will trade sideways, tilting towards the negative”, United Capital analysts added.

“We expect sustenance of the bull pressure as investors continue to position ahead of the much anticipated announcements of cabinet ministers by the federal government,” said research analysts at Cowry Asset Management Limited.

Iheanyi Nwachukwu