Investors in Nigeria’s equities market lost about N248billion in the trading week ended Friday, March 22. The market decreased by 0.42percent in the review week.
The market witnessed elevated sell-side pressure in the review trading week, recording three sessions of negative closes as against two days of positives.
Investors sold mostly consumer goods stocks despite increases buy sentiments in favour of banking and insurance stocks.
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The market’s year-to-date (YtD) return remains positive at 39.95percent, while month-to-date (MtD), the market has increased by 4.67percent.
Futureview research analysts had ahead of the review week’s trading anticipated a mixed performance, “as investors assimilate new inflation data and await corporate actions within the equities market”.
Nigeria’s recently released February 2024 Consumer Price Index (CPI) report by the National Bureau of Statistics (NBS) showed that rising food prices pushed inflation rate to 31.70 percent in February. This is compared with 29.90 percent in January and 21.91percent recorded year-on-year (y/y) in February 2023.
“Our recommendation to investors is to consider allocating capital towards high-quality stocks supported by strong fundamentals,” Futureview research analysts further said in their March 19 stock recommendation.
The Nigerian Exchange Limited (NGX) All-Share Index (ASI) and equities market capitalisation decreased week-on-week (WoW) from preceding week’s highs of 105,085.25 points and N59.416trillion respectively to 104,647.37 points and N59.168 trillion.
At the March executive breakfast session of the Lagos Business School (LBS), Financial Derivatives Company (FDC) analysts in their presentation noted that the Nigerian stock market correction is expected to persist.
According to them, “A hike in monetary policy rate will trickle down to the effective rate and further dampen investor appetite for equities.”
“High interest rates will discourage speculative behaviour in the stock market, which will lead to a reduction in the risk of financial instability and drive Nigerian stocks to more reasonable valuations. Underwhelming corporate earnings and dividend will send equity investors in search of alternative and attractive asset prices. It is not all bad news for Nigerian equities market investors,” FDC analysts further said.
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While acknowledging that Nigerian banks are major beneficiaries of FX gains, the analysts also noted the banks will continue to be major beneficiaries of high yields from investment securities. While dividend paying stocks will be marked down for dividend, the analysts believe it is an opportunity for investors to position for future upsides.
“As market anticipates FY’23 numbers from the banking sector, we expect to see trade remain elevated in that space,” said Lagos-based Vetiva analysts in their March 21 post-trade note.
