Analysts Predict Profit-taking Amid N1.99tn WoW Market Cap Decline

Kayode Tokede

Capital market analysts have predicted that investors’ profit-taking will continue to rock the stock market of the Nigerian Exchange Limited (NGX) this week as stock investors seek policy direction from the Central Bank of Nigeria (CBN) to trigger the positive sentiment.

It was another profit-taking outing last week for the stock market on the back of weak sentiment which was spurred by higher yields outlook in the fixed-income market as portfolio rebalancing continues ahead of expected 2023 corporate earnings and outcome of the Monetary Policy Committee (MPC) of CBN.

Specifically, the NGX All-Share Index declined by 3.44 per cent week-on-week (W-o-W) to close at 102,088.30 basis points, while the overall market capitalisation lost N1.99 trillion to close the week at N55.861 trillion.

The MPC is scheduled to convene on February 26th and 27th, marking its inaugural meeting for the year and the first for the current CBN governor, following two postponements in the latter half of 2023. This will also be the first session of the newly constituted committee since the change of guard at the CBN.

A group of analysts at Cowry Asset Management Limited said, “we anticipate the bearish sentiment to continue as the market seek catalyst and policy direction from economic managers to trigger the positive sentiment.

“However, as we anticipate more corporate releases for the final quarter of 2023, investors will begin to rebalance their portfolio in their search for alpha amidst the rising fixed income yields and outcome of the monetary policy meeting. Meanwhile, we continue to advise investors on taking positions in stocks with sound fundamentals.”

Afrinvest Limited said:  “in the new week, we expect bargain-hunting opportunities to boost market performance.”

Analysts at Cordros Research stated that it expected limited bargain-hunting activity in the near term due to prevailing negative sentiments driven by movements in fixed-income market yields and uninspiring earnings releases.

They anticipated a decisively hawkish stance from the MPC regarding interest rates, aligning with the CBN’s commitment to achieving price stability.

“Our projection is for a significant increase in the monetary policy rate by 150basis points while leaving other parameters constant. The anticipated increase in the policy rate would be in contrast to the prevailing global trend, where many central banks are scaling back on rate hikes and contemplating reductions.

“We expect the MPC’s decision to be primarily influenced by the soaring inflation, which rose to a multi-decade high of 29.90%, and the depreciation of the currency,” Cordros Research added.

The chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion said “we expect mixed sentiment to continue as players digest the latest GDP data and outcomes of the recent auctions of Debt Management Office (DMO) and Central Bank of Nigeria (CBN) in the face of expected audited corporate earnings and ongoing portfolio rebalancing.

“This is amidst the volatility 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.”

According to Exchange, the sectoral performance was largely downbeat as the see-saw movement continues across stocks. The NGX Insurance and NGX Industrial goods indices were the least performing as they pared previous week gains by 8.91 per cent and 7.94 per cent week on week, while the NGX Banking index recorded a weekly loss of 2.10 per cent.

On the flip side, the NGX Consumer goods index posted a weekly gain of 2.01 per cent and the NGX Oil & Gas index rose by 0.01 per cent W-o-W.

The market breadth for the week was negative as 14 equities appreciated in price, 66 equities depreciated in price, while 74 equities remained unchanged. Juli led the gainers table by 59.18 per cent to close at N2.34, per share. SUNU Assurance followed with a gain of 17.42 per cent to close at N2.09, while FBN Holdings (FBNH) went up by 10.71 per cent to close to N31.00, per share.

On the other side, Morison Industries led the decliners table by 32.66 per cent to close at N1.67, per share. Consolidated Hallmark Insurance followed with a loss of 19.35 per cent to close at N1.25, while Sterling Financial Holdings Company declined by 18.69 per cent to close at N4.35, per share.

Overall, a total turnover of 1.377 billion shares worth N31.584 billion in 42,040 deals was traded last week by investors on the floor of the Exchange, in contrast to a total of 1.559 billion shares valued at N36.497 billion that exchanged hands previous week in 42,546 deals.

The Financial Services Industry (measured by volume) led the activity chart with 960.519 million shares valued at N16.844 billion traded in 19,669 deals; contributing 69.77 per cent and 53.33 per cent to the total equity turnover volume and value respectively. The Conglomerates Industry followed with 115.241 million shares worth N1.511 billion in 2,859 deals, while the Oil and Gas Industry traded with a turnover of 80.866 million shares worth N1.721 billion in 2,726 deals.

Trading in the top three equities; Guaranty Trust Holding Company (GTCO), FBN Holdings (FBNH) and Transnational Corporation (measured by volume) accounted for 343.584 million shares worth N9.431 billion in 5,659 deals, contributing 24.96 per cent and 29.86 per cent to the total equity turnover volume and value respectively.