Stock Market Gains N121bn WoW Despite Interest Rate Hike

Kayode Tokede

Amid interest rate hike by Central Bank of Nigeria (CBN) to 27.25 per cent at the last week’s Monetary Policy Committee (MPC) meeting, the Nigerian equities market gained N121 billion Week-on-Week (WoW) to close at N56.578 trillion.

Investors’ positive sentiment dominated three out of the five trading sessions, to drive 0.21 per cent WoW gain in Nigerian Exchange Limited All-Share Index (NGX ASI) to 98,458.68 basis points.

The MPC of the CBN after a two-day meeting voted to increase interest rate to 27.25 per cent, retain the Asymmetric corridor around the MPR at +500/-100basis points, raise the Cash Reserve Ratio (CRR) of commercial banks by 500basis points to 50 per cent and Merchant Banks by 200basis points to 16 per cent and  retain the Liquidity Ratio at 30 per cent.

However, the sectoral performance for the week was varied.

The NGX Oil & Gas index advanced 3.3 per cent Week-on-Week (W-o-W).  The Banking and Insurance indices recorded a weekly gain of 2.5 per cent and 1.4 per cent respectively.

On the flipside, the Consumer Goods index 0.1 per cent for week, while NGX Industrial Goods index posted a weekly decline of 0.04 per cent.

The market breadth for the week was positive as 45 stocks appreciated in price, 33 equities depreciated in price, while 73 stocks remained unchanged.

Ellah Lakes led the gainers table by 59.74 per cent to close at N4.92, per share. Regency Assurance followed with a gain of 53.33 per cent to close at 69 kobo, while Flour Mills Nigeria went up by 22.89 per cent to close to N62.00, per share.

On the other side, Caverton Offshore Support Group led the decliners table by 27.37 per cent to close at N2.68, per share. Multiverse Mining and Exploration followed with a loss of 19.64 per cent to close at N9.00, while Okomu Oil declined by 13.10 per cent to close at N363.00, per share.

Overall, a total turnover of 3.318 billion shares worth N45.911 billion in 49,243 deals was traded last week by investors on the floor of the Exchange, in contrast to a total of 1.860 billion shares valued at N38.445 billion that exchanged hands prior week in 40,228 deals.

The Financial Services Industry (measured by volume) led the activity chart with 1.430 billion shares valued at N23.659 billion traded in 22,745 deals; contributing 43.09 per cent and 51.53 per cent to the total equity turnover volume and value respectively. The Oil and Gas Industry followed with 703.389 million shares worth N7.323 billion in 6,207 deals, while the Healthcare Industry traded a turnover of 411.489 million shares worth N2.896 billion in 827 deals.

 Trading in the top three equities; Japaul Gold & Ventures, Mecure Industries and Fidelity Bank (measured by volume) accounted for 1.363 billion shares worth N9.472 billion in 4,050 deals, contributing 41.06 per cent and 20.63 per cent to the total equity turnover volume and value respectively.

Analysts have anticipated a bearish performance on the Nigerian stock market as investors reassess their portfolio following the recent increase in MPR.

 They noted that “all eyes are also on the third quarter (Q3) earnings reporting season expected to usher in seasonality and sentiments necessary for discerning investors and smart traders to take advantage of the last quarter of the year volatility and season to create wealth.”

The current state of the market with likely continuation of trend or reversal has created opportunity to buy into real value and fairly priced companies as revealed by their half-year corporate numbers and price to earnings ratios ahead of their Q3 scorecards. As correction at this point makes equity market attractive due to sentiments associated with year-end and last quarter of every year.

Already, companies have started notifying the market of their closed period and board meeting to approval their scorecards in the new month. The pullbacks of some companies that seen profit taking or selloffs in recent days creates another opportunity for new entrants who understand the big picture and market dynamics.

 The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, said that “we expect mixed sentiment to continue on profit taking and portfolio rebalancing ahead of quarter-end window dressing and Q3 earnings session. Also, sector rotation continues in the market, with investors taking advantage of pullbacks to buy into value.

 “This is amid the volatility and pullbacks that add more strength to upside potential. Consequently, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.”

 Analysts at Afrinvest Limited added that “this week, we anticipate a bearish performance on the local bourse as investors reassess their portfolio following the recent 50 basis points increase in MPR.”