Market sees negative start to new week on FX, inflation concerns

Nigeria’s equities market kicked off a new week in red (down by 0.06percent or N22 billion) as investors continued to price in risks of deteriorating economic conditions.

The high inflation rate and freefall of the Naira against the greenback are major risks to the attractiveness of equity investment, according to market analysts.

At the close of trading on Monday, the Nigerian Exchange Limited (NGX) All-Share Index (ASI) and equities market capitalisation depreciated from 66,915.41 points and N36.764 trillion respectively to 66,876.92 points and N36.742trillion.

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In their view, Meristem research analysts said: “In our view, there is an underlying negative sentiment in the local bourse largely due to the deteriorating macroeconomic conditions”.

“Precisely, the stubbornly high inflation rate and continuous freefall of the Naira in the foreign exchange market are risks to the attractiveness of equity investment.

“Thus, we envisage continued selloffs on tickers this week. Notwithstanding, we do not rule out bargain-hunting activities, especially as nine months (9M) 2023 earnings results are released. Overall, we posit that the NGX ASI will close down this week,” Meristem research analysts added.

VFD Group led the league of laggards after moving from N269.30 to N242.40, down by N26.90 or 9.99percent; followed by University Press which dropped from N2.36 to N2.14, down by 22kobo or 9.32percent. CHI also dropped from N1.15 to N1.09, down by 6kobo or 5.22percent.

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“This week, we anticipate continued mixed sentiment trading as sentiments from the new inflation data stand fresh. We advise investors to invest in high-quality stocks with strong fundamentals supporting them,” Futureview research analysts said in their October 23 note.

In 6,133 deals, investors exchanged 314,619,296 shares valued at N4.388billion. UBA, Access Corporation, FCMB, GTCO and Transcorp were the most traded stocks.

United Capital analysts said, “This week, we expect mixed investors’ sentiments in the equities market to continue. We anticipate more improvements in positive sentiments as investors look to position ahead of the 9M-2023 earnings season. The weak earnings expectation will remain a downside to the overall rebound of positive sentiments”.