Nigeria’s equities market still increased by 0.12 percent or N35billion in the trading week ended Friday January 27, despite three trading sessions of negatives as against two sessions of positive closes.
Rising from its first meeting of the year, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) in the review trading week decided to sustain its tightening policy.
The sentiment at the Nigerian exchange improved slightly as investors anticipate impressive full year 2022 results from some of the listed companies.
This month, the market has increased by 2.74percent amid bargain hunting and profit taking in notable counters.
Except NGX Consumer Goods Index which was down by 1.09percent, all other sectoral key sectoral indices closed the review trading week in green. For instance, NGX Industrial Index was up by 0.37percent, NGX Insurance Index (+0.77percent), NGX Banking (+1.65percent), and NGX Oil & Gas (+1.73percent).
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Week-on-week (WoW), the Nigerian Exchange Limited (NGX) All-Share Index (ASI) and its equities market capitalisation appreciated from 52,594.68 points and N28.646trillion to 52,657.88 points and N28.681trillion.
The 289th meeting of the Monetary Policy Committee (MPC) which had started on Monday ended on Tuesday, January 24.
The MPC raised the Monetary Policy Rate (MPR) by 100 basis points (bps) to 17.5percent; retained the asymmetric corridor of the MPR at +100 / -700 basis points; retained the Cash Reserve Ratio (CRR) at 32.5percent; and retained liquidity ratio at 30percent.
“Going forward, we expect the hawkish policy decision to contribute to a slowdown in equities in the short run. Also, we expect the decision to muddy the outlook for the fixed income market. On one hand, robust system liquidity and healthy maturity inflows will raise demand for fixed income instruments. On the other hand, investors will likely begin to price in the rate hike at subsequent primary auctions.
“Overall, we reckon the unexpected aggressiveness of the MPC will create a volatile fixed income market for the rest of the quarter, with the yield curve likely to record a bear flattening (short term interest rates rising faster than long term rates),” United Capital analysts said in their January 25 note.