Stocks see further dip in early trading on Tuesday ahead of MPC decision

Ahead of today’s decisions from the ongoing Monetary Policy Committee (MPC) meetings, Nigeria’s equities market was seen down by 0.12 percent in early trading on Tuesday.

After the market’s negative start to this new week, its early dip on Tuesday further confirms some analysts expectation that the bearish sentiment will persist ahead of MPC decisions.

As at 11.20am, the Nigerian Exchange Limited (NGX) All-Share Index (ASI) and Market Capitalisation decreased by 0.12 percent or N65billion from preceding day’s 101,995.21 points and N55.810trillion to 101,877.51 points and N55.745trillion.

“Negative sentiment has prevailed in the local bourse for weeks, with market breadth which measures the ratio of gainers to losers staying below the 1.00x mark for the past five weeks, settling at 0.25x last week.

“With the upcoming monetary policy committee meeting on the 26th and 27th of February, we anticipate a minimum 100bps hike, which bodes negatively for risky investments. Consequently, we foresee the attractiveness of fixed income instruments dampening the inflow of funds into the equities market this week.

“However, we acknowledge the possibility of bargain hunting activities on stocks that experienced declines in the previous week. In light of these factors, our projection leans towards a bearish outlook for the Nigerian equities market, anticipating the market to close down,” Meristem analysts said on in their February 26 note to investors.

In 3,091 deals during early trading on Tuesday, investors exchanged 50,239,627 shares worth N1.505billion as at 11.20am.

“Last week, the local bourse posted the biggest weekly loss in over a year, with the benchmark index down 3.44percent, while our Model Equity Portfolio (MEP) shed 2.60percent, outperforming by 84 basis points (bps).

“Our tactical decision to significantly lower our notional weight in Dangote Cement, as well as the addition of Geregu, were primary drivers of the MEP’s outperformance. Dangote Cement, having rallied to fundamentally unjustified levels, necessitated the profit-taking exercise. For Geregu, given the increasing momentum in the ticker, we have managed to build a notional market weight, as advised last week.

“Elsewhere, our banking holdings cost the portfolio 44bps. We expect banking audited earnings by the end of the month to support sentiment. Meanwhile, we have begun increasing our notional weight in Seplat Energy and Airtel Africa. This week, we will continue to increase our weights in Seplat and Airtel as liquidity permits, while monitoring other positions actively,” said Lagos-based CardinalStone research analysts in their note to investors.