Stock market sees first gain after MPC decisions as GTCO, UBA rally

The record negative trend seen at the Nigerian equities market could not continue till close of trading on Thursday as investors moved to take advantage of the market’s recent dip for re-entering into value stocks.

The rise by 0.68 percent or N390 billion at the close of trading on Thursday became the market’s first positive close since the outcome of last Tuesday’s bimonthly meeting of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC).

Thanks to investors who bought shares of GTCO and UBA that helped in redirecting the market northward. GTCO share price rallied most on the Bourse from N36 to N39.60, up by N3.60 or 10 percent. It was followed by that of UBA which increased from N20.50 to N22.55, up by N2.05 or 10 percent.

The Monetary Policy Committee (MPC) on Tuesday at the end of its two-day bimonthly meeting raised the Monetary Policy Rate (MPR) by 400 basis points (bps) to 22.75percent.

The MPC also changed the asymmetric corridor from +100/-300 to +100/-700 around the MPR, raised the Cash Reserve Requirement (CRR) from 32.50percent to 45percent while the liquidity ratio was held constant at 30percent.

“We expect yields in the fixed-income market to trend higher given the CBN’s disposition to deploy orthodox monetary policy tools (example OMO auction) to mop-up excess liquidity.

“For the equities market, we expect the bearish sentiments we have observed in recent weeks to persist. This is hinged on the resultant effects of the increase in interest rate on fixed income yields,” United Capital research analysts said in their post-MPC note.

The NGX All-Share Index (ASI) which had slipped below the 100,000 mark on Wednesday could not continued on that negative at the close of trading on Thursday despite that some investors are seeking better yields after MPC rate hike.

The NGX All Share Index (ASI) which stood at 99,302.56 point on Wednesday increased to 99,980.3 points as at close of trading on Thursday. Listed stocks value also increased from preceding day’s N54.317trillion to N54.707trillion.

Also, Meristem research analysts in their post-MPC note said the MPC’s hawkish stance underscores its continued dedication to tackling inflationary pressures.

“We anticipate a negative effect on the equity market, with potential selloffs, as investors reallocate funds to the fixed-income market to take advantage of the elevated yields. On the other hand, we expect the higher yields to further spur foreign investors interest in the domestic fixed income market,” Meristem research analysts added.

In 9,650 deals, investors exchanged 542,950,169 shares worth N8.696billion.

“As expected, the market reacted negatively to the rate hike in MPR and we are likely to see similar bearish sentiment filter into tomorrow’s (that is Thursday) trading session,” Lagos-based Vetiva Research said on Wednesday.