Presco, Dangote Sugar, others cause market’s negative start to new week

…sell pressure to persist as another rate hike looms on inflation

Nigeria’s equities market opened this week on a slightly negative note (-0.01percent). Investors lost about N19billion at the close of trading on Monday August 15. The market’s performance indicators – the Nigerian Exchange Limited (NGX) All-Share Index (ASI) and Market Capitalisation decreased from 49,664.07 points and N26.787trillion respectively to 49,629.43 points and N26.768trillion.

Also, the market’s positive return year-to-date (YtD) printed lower at +16.25 percent at the close of trading session on Monday.

The share price of Presco Plc decreased most by N15.80 or 9.97percent, from N158.40 to N142.60; followed by Dangote Sugar Refinery which moved down from N16.70 to N16, losing 70kobo or 4.19percent, and Multiverse Mining and Exploration Plc which also decreased from N2.44 to N2.25, losing 19kobo or 7.79percent. Etranzact, FBN Holdings, UBA, GTCO and Transcorp were top-5 traded stocks. In 4,122 deals, investors exchanged 210,835,728 shares valued at N2.187billion.

The sell pressure seen on the Nigerian stock market will continues as rising rate of inflation signals another benchmark interest rate hike in September is possible. The National Bureau of Statistics (NBS) released its July inflation report which shows headline rate of 19.64percent year-on-year (y/y) from 18.60percent in June.

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“The CBN’s in-house estimates suggest that inflation is expected to remain considerably high, partly due to the build-up of increased spending related to the 2023 general elections. We expect data releases such as the second-quarter (Q2) 2022 national accounts and August’s inflation report to provide guidance on the MPC’s policy stance at its September meeting.

This is largely due to the committee’s resolve to restore price stability while providing necessary support to the economy. In our view, another rate hike in September is not far-fetched. The MPC is scheduled to hold its next meeting on the 26th and 27th of September 2022,” according to Chinwe Egwim, Chief Economist, Coronation Research in a recent note following the inflation report.

“With inflationary pressure pushing yields higher in the fixed income space, we expect to see mixed trends in the equity market with a more cautious/bearish tone, as large cap names continue to dictate market direction,” said Lagos-based Vetiva research analysts.

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