Stocks record N41bn loss after APC presidential primary

Nigeria’s stock market recorded its first loss this week, declining by N41 billion or 0.14 percent on Wednesday.

The downturn on the bourse comes on the heels of a long-drawn presidential primary of the ruling All Progressives Congress (APC), from which Bola Ahmed Tinubu emerged as the presidential candidate of the party.

Analysts at Financial Derivatives Company (FDC), in their June 3 presentation at LBS Breakfast Club, had expected the Nigerian Exchange Limited (NGX) to maintain horizontal–downward trend, saying institutional investors would rebalance their portfolio for attractive fixed income yields.

“Telco stocks will continue to rally. Banking stocks will drift as they struggle with market share and cut costs. Expect an increase in their cost of funding and impairment. Corporate margins will shrink due to expensive borrowings,” FDC analysts added.

Amid the kick-off of Nigeria’s longest election cycle, traders on the bourse exchanged 248,958,637 shares valued at N1.861 billion in 4,265 deals.

Currently, foreign inflows into the Nigerian equities market remain low. Investors had continued to trade cautiously in the absence of major catalysts to spur activities on the exchange.

“We expect the selloffs witnessed in the market in the past weeks to persist, as investors take profit on stocks that have recorded decent gains previously. We also do not see any significant positive trigger to spur buying interest in the market,” Meristem analysts said in a June 6 note to stock buyers.

Champion Breweries led the league of market’s decliners after losing 38 kobo or 9.79 percent to close at N3.50. It was followed by NEM Insurance, which decreased from N4.20 to N3.85; and ETranzact International, which dropped from N3 to N2.71.

Cutix, on the other hand, led the advancers after its share price increased from N2.61 to N2.74.

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As the market halted a two-day gaining streak to close in red, its performance indicators – the NGX All Share Index and market capitalisation decreased from 53,270.88 points and N28.718 trillion respectively on Tuesday to 53,193.98 points and N28.677 trillion. The market’s year-to-date return decreased to 24.53 percent.

Transcorp, Fidelity Bank, FBN Holdings, Japaul Gold and Chams were the most traded counters on the nation’s exchange.

“Although we anticipate continued profit-taking, we also expect investors to begin bargain hunting by cherry-picking fundamentally sound stocks at a discount. We advise investors to buy stocks on our recommendation list at current prices ahead of the H1-2022 earnings and dividend season,” analysts at Lagos-based United Capital said in their June 6 note.

Market watchers observed the secondary fixed income market was largely quiet on Wednesday, even as most trades were accomplished across board.

Analysts at Vetiva Research, in their June 8 report, said: “In the bonds segment, we saw mixed trading across the curve, with buy-side activity dominating the mid-to-long end, while sell-offs persisted across the short-end, although average yield remained unchanged day-on-day.

“Of note, the yield on the 13 percent FGN-JAN-2042 tenor fell 7 basis points (bps) to settle at 13.11 percent, while the 12.50 percent FGN-JAN-2026 bond rose 9bps to close at 10.30 percent. Meanwhile, in anticipation of higher marginal rates at the auction, the NTB segment saw mild selloffs at the short- to mid-section of the curve. Consequently, average yield trended 2bps higher in the space.”

In the absence of any significant market catalyst, the analysts anticipate a continuation of a similar trading pattern in the bonds space, “while the NTB segment is expected to trade actively as post-auction sentiment filters into the market”.