Illiquidity, high-interest rate reduce capitalisation by N601 billion
Low liquidity in the equities space occassioned by high yields in the fixed income (FI) market, rising inflation and high-interest rate have continued to depress appetite for stocks as investors lose N601.3 billion in one week.
At the close of transactions on the Nigerian Exchange Limited (NGX) last week, sustained sell pressures in Airtel Africa (-10.0 per cent) dragged the all-share index and market capitalisation by 2.08 per and N601.3 billion to close the week at 51,893.94 and N28.2 trillion respectively.
Similarly, all other indices finished lower except NGX consumer goods and NGX sovereign bond, which appreciated by 0.05 per cent and 1.54 per cent respectively while the NGX ASeM, NGX oil & gas, and NGX growth indices closed flat.
Month-to-date (MTD) and year-to-date(YTD returns settled at -4.3 percent and +1.3 per cent respectively.
Analysts explained that investors’ sentiments are influenced by developments in the macroeconomic landscape and the movement of yields in the fixed-income space.
According to them, even the Q1 numbers are likely to come, predominantly mixed, owing to the low economic activities during the period as a result of to cash crunch.
However, the Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion, said the prevailing dividend yields and low market price-to-earnings ratio provide better opportunities for discerning investors to hedge against inflation even when fixed-income market yields look attractive.
“Market volatility remains at the extreme on mixed sentiment. We expect the trend to continue as players are being cautious, ahead of the March inflation data and more Q1 earnings expectations amid price adjustments for dividends and pending 2022 audited numbers.
“There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as a policy shift may be a plus for equities on a likely financial market and economic reset.
“Investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.”
For analysts at Codros Capital: “With the moderation in the prices of bellwether stocks over the past weeks, we expect the bulls to make a re-entry. We believe this may be further influenced by positive Q1-23 earnings releases.
“In the medium term, we expect investors’ sentiments to be influenced by developments in the macroeconomic landscape and the movement of yields in the fixed income space.
“Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings.”
Further breakdown of last week’s transactions showed that the conglomerate industry (measured by volume) led the activity chart with 1.8 billion shares valued at N2.5 billion traded in 931 deals; thus contributing 63.6 per cent to total equity turnover.
The financial services industry followed with 590.7 million units worth N5.6 billion in 7,869 deals. The ICT industry ranked third with a turnover of 313.7 million shares worth N1.2 billion in 1,340 deals.
Trading in the top three equities namely Transnational Corporation Plc, Chams Holdings Company Plc and United Bank for Africa Plc (measured by volume) accounted for 2.3 billion shares worth N3.9 billion in 1,922 deals, contributing 79.8 per cent to the total equity turnover.
On the whole, a turnover of 2.8 billion shares worth N10.9 billion was recorded in 15,686 deals by investors on the floor of the exchange, higher than a total of 1 billion units valued at N10 billion that was exchanged in 16,155 deals on April 7, 2023.
A total of 525 units of Exchange Traded Products (ETPs) valued at N591, 412.35 were traded in 28 deals compared to 1,804 units valued at N755, 567.4 transacted in 33 deals during the preceding week.
Also, 5,200 units of bonds valued at N5 million were traded in 18 deals compared to a total of 26,065 units valued at N24.8 million transacted in 25 deals.
On the price movement chart, 18 equities appreciated during the week higher than 16 equities in the previous week. 39 equities depreciated higher than thirty-seven 37 in the previous week, while 99 equities remained unchanged.