MPC’s ‘hold’ decision to strengthen investors’ interest in Nigerian equities

At the end of the two-day policy meeting, the Monetary Policy Committee (MPC) members voted to hold all policy variables at current levels with the intention to give more room for the previous rate cut to run its full course on the economy.

The Committee decided to hold Monetary Policy Rate (MPR) at 11.5percent; maintained the asymmetric corridor around the MPR at +100/-700basis points (bps); retained Cash Reserves Ratio (CRR) at 27.5percent; and retained liquidity ratio at 30percent.

Analysts noted that MPC decision was made in light of the increasing second wave of Covid-19 infection, vaccine developments and the recent rally in oil prices amid rising inflation and exchange rate divergence.

Looking at the implication of the MPC’s hold decision, United Capital Research analysts said investors will continue to show interest in the equities market, adding that demand for short term bills will persist while investors will continue steadily to exit long dated bonds.

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“With the latest decision of the Monetary policy Committee to retain all policy parameters in the first meeting for the year, we expect the equity market to continue to be positively patronized in the short term, as investors’ continue to channel funds to attractive counters while seeking alpha returns”, according to Lagos-based Vetiva research analysts.

The market gained on Tuesday as investors chose to buy stocks like Airtel Africa, Flour Mills, Lafarge Africa, MTNN, and Fidson Healthcare.

The price of Airtel Africa moved up from N855 to N920, after adding N65 or 7.60percent. Flour Mills share price went up from N32 to N34, adding N2 or 6.25percent. Lafarge Africa increased from N26.5 to N27.5, up N1 or 3.77percent; while MTNN rose from N170 to N170.9, adding 90kobo or 0.53percent. Likewise, the price of Fidson Healthcare rallied from N4.65 to N5.05, up by 40kobo or 8.60percent.

At the close of trading on Tuesday January 26, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) increased by 1.21percent, from 41,088.96 points to 41,584.94 points. The market has advanced by about 1.42percent this week, while this year it has risen by 3.26percent.

Also, the value of listed equities reached new high, from N21.494trillion to N N21.753trillion –which implies that investors gained about N260billion.

In 5,990 deals, investors exchanged 467,886,480 units valued at N5.565billion. Transcorp, AXA Mansard, Japaul Gold, Sovereign Trust Insurance and LASACO were actively traded stocks on the NSE.