Market Cap Drops by N1.42tn WoW as Investors Shift to Fixed-income Instruments

Kayode Tokede

The Nigerian equities market recorded N1.42 trillion decline last week, the first since the beginning of trading in 2024, as investors shifted their focus to the fixed-income market in pursuit of higher yields.

The market capitalisation dropped to N55.735 trillion from N57.158 trillion the stock market opened for trading, representing a N1.42 trillion or 2.49 per cent week-on-week (WoW) decline.

 Accordingly, the Nigerian Exchange Limited All-Share Index (NGX ASI) declined by 2.45 per cent WoW to close at 101,858.37 basis points from 104,421.23 basis points. 

Consequently, the stock market Month-till-Date (MtD) and Year-till-Date (YtD) returns moderated to +0.7per cent and +36.2per cent, respectively.

Last week witnessed a notable correction in the local bourse, marking the first downturn in 16 weeks, propelled by sell sentiments particularly from institutional investors. The motive behind this shift in sentiment appears to be portfolio rebalancing for safety.

This adjustment precedes the expectations set for the Monetary Policy Committee (MPC) meeting this month and follows the recent surge in treasury rates to a nearly seven-year high. This portends that the Central Bank of Nigeria (CBN) is signaling a return to orthodox monetary policy tools to curb inflation and the move to entice foreign investors back into Nigeria’s economy adds to the backdrop.

However, the sectoral performance exhibited a negative trend. The NGX Banking and NGX Industrial indices led the losses, declining by 6.86 per cent and 4.16 per cent, respectively.

Also, NGX Insurance, NGX Oil & Gas, and NGX Consumer Goods indices recorded a weekly loss of 1.48 per cent, 0.40 per cent and 0.14 per cent.

The market breadth for the week was negative as 20 equities appreciated in price, 68 equities depreciated in price, while 66 equities remained unchanged. Meyer led the gainers table by 60.70 per cent to close at N6.91, per share. Juli followed with a gain of 44.29 per cent to close at N1.01, while Geregu Power went up by 19.00 per cent to close to N675.90, per share.

On the other side, Eterna led the decliners table by 18.78 per cent to close at N17.95, per share. Abbey Mortgage Bank followed with a loss of 18.39 per cent to close at N2.44, while Unity Bank declined by 17.79 per cent to close at N2.31, per share.

Overall, a total turnover of 2.478 billion shares worth N47.856 billion in 54,982 deals was traded last week by investors on the floor of the Exchange, in contrast to a total of 3.893 billion shares valued at N95.147 billion that exchanged hands prior week in 69,117 deals.

The Financial Services Industry (measured by volume) led the activity chart with 1.687 billion shares valued at N28.514 billion traded in 25,751 deals; contributing 68.10 per cent and 59.58 per cent to the total equity turnover volume and value respectively.

The Conglomerates Industry followed with 210.272 million shares worth N2.988 billion in 4,419 deals, while the Oil and Gas Industry traded a turnover of 203.777 million shares worth N2.139 billion in 4,544 deals.

Analysts on the Nigerian capital market stated that the current bearish trend is expected to persist as investors seek refuge in fixed-income instruments amid dividend expectations.

In the new week, analysts at Cowry Assets Management Limited anticipated “the current bearish trend to persist as investors seek refuge in fixed -income instruments due to the high yields as seen recently amid dividend expectations and high market volatility ahead of the January Consumer Price Index (CPI) data from the NBS and the impending Monetary Policy Committee meeting this February.

“However, a pullback at this juncture is expected to strengthen upside potential. Amidst all these, we continue to advise investors to take position in stocks with consistent track records of dividend payments and strong fundamentals and growth prospect to support earnings growth.”

The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion said “we expect bear sentiment to continue as investors run for safety in fixed income instrument due to high yields in the face of dividend expectations and volatility ahead of January CPI and upcoming policy meeting, while pullback at this point will add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.”

In addition, analysts at Cordros Research in a statement said, “We expect the weak sentiments that dominated the local bourse this week to persist in the week ahead as investors continue to scale down exposure to equities amidst expectations of a continued uptick in fixed income yields.”