Investors in the equity market in February lost about N1.55tn over high yields in the fixed-income market.
The hike in the monetary policy rate to 22.75 per cent is also expected to further drive interest away from the capital market in the short- to medium-term as investors seek better yields.
The Nigerian Exchange opened February with All-Share Index and market capitalisation at 102,802.25 and N56.26tn, respectively, it closed at 99,980.30 and N54.71tn, marking a 2.75 per cent decline.
According to a stockbroker and the Vice Chairman of Highcap Securities, David Adonri, while the pullback in February had been projected, more correction is expected as full-year results of listed companies are published.
“The pullback of the equities market in February 2024 is not surprising, although, frantic efforts were made to recover some lost ground today (Friday). More corrections are imminent as the full-year results of many listed companies are unable to justify their rooftop prices.
“The sustained rally that catapulted equities to frightening levels was propelled by sentiment. Now, judgment time has come when fundamentals will take central stage as full-year results emerge,” he said.
He revealed that the decision of the Monetary Policy Committee to hike rates would result in a moderation of funds flowing to the capital market, which he described was a positive development in the short term.
“In addition, the monetary policy rate that was recently tightened is expected to reduce liquidity flowing to equities, at least in the short term to cool down the market and avert dangerous bubble formation that can harm the economy.
“Finally, the credit squeeze that will emerge from recent monetary policy rate hike will encourage issuers to access their funds from the primary market of the capital market,” Adonri projected.
The researchers at Cowry Asset Management Limited in their weekly market report also projected that the hike in the MPR would slow the flow of funds to the capital market.
“We think the high-interest environment resulting from the recent policy rate hike by the Central Bank of Nigeria to 22.75 per cent and rising yields in the fixed-income market will likely influence investor behaviour,” they posited.
On a week-on-week basis, the local bourse recorded a significant dip as the ASI declined by 3.27 per cent to 98,751.98 points.
The market sentiment was largely influenced by weaker-than-expected corporate earnings releases and the initiation of the dividend earnings season in the face of the fixed-income market’s higher yield outlook.
The market capitalisation of listed equities also declined by 3.27 per cent week-on-week to N54.04tn, resulting in a year-to-date return of 32.07 per cent, as investors suffered N1.83tn weekly loss.
It was a lacklustre performance across the sectoral front in the past week as the Insurance and Industrial goods sectors bore the brunt of the dip, losing 3.40 per cent and 3.87 per cent, respectively, driven by mainly Sunu Assurances, BUA Cement, and Lafarge.
Similarly, the consumer goods, oil & gas, and banking sectors shed 2.62 per cent, 1.55 per cent, and 0.69 per cent, respectively, largely due to sell-offs in MTN Nigeria, Nestle, Eterna and Fidelity Bank.
During the week, a total 1.88 billion units of shares worth N34.149bn were exchanged in 48,464 deals, higher than 1.377 billion shares valued at N31.584bn traded in the previous week in 42,040 deals.
The financial services industry dominated trading when measured by volume with 1.275 billion units of shares valued at N20.427bn traded in 24,801 deals; contributing 67.78 per cent and 59.82 per cent to the total equity turnover volume and value, respectively.
The conglomerates industry followed with 227.237 million shares worth N2.972bn in 3,351 deals and third place was the oil and gas industry with a turnover of 115.327 million shares worth N746.959m in 2,704 deals.
Trading in the top three equities were Transnational Corporation Plc, United Bank for Africa Plc and Access Holdings Plc in terms of volume, accounting for 563.139 million shares worth N10.155bn exchanged in 9,270 deals and contributing 29.93 per cent and 29.74per cent to the total equity turnover volume and value, respectively.
Some of the gainers during the week included Juli Plc, PZ Cussons and Sterling Financial Holdings, which gained 60.26 per cent, 27.36 per cent and 14.94 per cent to close at N3.75, 33.75 and N5.
On the decliners’ chart were MTN Nigeria, which lost 18.91 per cent to close at N200; Sunu Assurances lost 18.18 per cent to close at N1.71 and Nestle Nigeria dipped by 18.18 per cent to close at N900.
Analysts have projected that there may be a lift in the market this week as investors react to the corporate earnings scorecards and announced corporate actions.
SOURCE: PUNCHNG
