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Investors’ appetite for stocks wane on rising fixed yield

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Following the rising yields in the money market instruments, the bears maintained dominance on the Nigerian Exchange Limited (NGX). This caused the NGX All-Share Index (ASI) and market capitalisation to depreciate by 0.15 per cent and 0.12 per cent to close the week at 38,808.01 and N20.310 trillion respectively.

All other indices finished lower except NSE Premium, NSE Lotus II, NSE Industrial, and NSE Sovereign Bond Index which appreciated by 0.65 per cent, 0.09.per cent, 0.95 per cent and 0.17 per cent while the NSE ASeM and NSE Growth Indices closed flat.

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Analysts link the lull in the equities market to macroeconomic challenges bedeviling the nation’s economy.

For instance, the Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion said: ” It is obvious that the nation’s stagflation is not driven by excess liquidity in the system but the cost pushed, arising from policy mismatch which is fueling insecurity, unemployment, and high cost of living.

“If these are not checked by policymakers and economic managers, it could short-live the fragile economic recovery recorded so far. There is a need for the government to carry out structural reforms that will boost recovery and growth at the desired pace for the benefit of all Nigerians.

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“However, monetary policy alone cannot do much to revamp the economy, without the fiscal side complementing the monetary policy actions. In the end, the high rate of borrowing from the public will translate to a high cost of financing the 2021 budget.”

Analysts at Codros Capital said: “With the Q1, 2021 earnings season on the horizon, we believe investors will be looking for how corporate earnings will evolve in 2021, given the expected improvement in macroeconomic conditions.

“However, we expect the lull in the market to persist as investors remain perturbed by the rising yields in the FI market. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.”

A review of market performance last week indicated that renewed profit-taking embarked by investors, the NGX halted gaining streak to reopen on a downward note on Monday, causing the All-Share Index (ASI) to decline by 0.4 per cent.

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ASI declined by 153.84 absolute points, representing a decrease of 0.4 per cent to close at 38,712.55 points.
Similarly, the overall market capitalisation value lost N81 billion, representing a drop of 0.37 per cent to close at N20.26 trillion.

The market loss was driven by price depreciation in large and medium capitalised stocks including Stanbic IBTC Holdings, Okomu Oil, Guinness Nigeria, Nigerian Breweries, and Custodian Investment.

Transactions on the NGX Limited extended losses to close on a downturn on Tuesday, as the market capitalisation depreciated further by N58 billion.

The ASI declined by 110.72 absolute points, representing a decline of 0.29 per cent to close at 38,601.83 points while the market capitalisation plunged by N58 billion to close at N20.202 trillion.

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The market loss was driven by price depreciation in large and medium capitalised stocks amongst which are; MTN Nigeria Communications (MTNN), Guinness Nigeria, Chemical & Allied Products (CAP), Julius Berger Nigeria, and NCR Nigeria.

Amid investors renewed appetite for stocks, transactions on the Nigerian Exchange (NGX) Limited rebounded on Wednesday, as the All-Share Index (ASI) rose by 0.09 per cent.

The ASI gained 34.32 absolute points, representing a growth of 0.09 per cent to close at 38,636.15 points. Similarly, the overall market capitalisation value rose by N18 billion to close at N20.220 trillion.

The uptrend was also driven by price appreciation in medium and large capitalised stocks amongst which are; Guinness Nigeria, MTN Nigeria Communications (MTNN), FBN Holdings (FBNH), Zenith Bank and Vitafoam Nigeria.

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The bears upstaged the bulls on the NGX, causing ASI to depreciate further by 0.17 per cent on Thursday.

The ASI decreased by 64.26 absolute points, representing a decline of 0.17 per cent to close at 38,571.89 points while market capitalisation declined by N34 billion to close at N20.186 trillion.

The downturn was driven by price depreciation in large and medium capitalised stocks amongst which are; Unilever Nigeria, Lafarge Africa, Northern Nigeria Flour Mills (NNFM), PZ Cussons Nigeria, and Union Bank of Nigeria.

Further analysis of last week’s trading showed that a turnover of 1.263 billion shares worth N10.759 billion was recorded in 19,975 deals by investors on the floor of the exchange, in contrast to a total of 887.037 million shares valued at N9.193 billion that exchanged hands in 17,837 deals during the preceding week.

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The financial services industry (measured by volume) led the activity chart with 853.125 million shares valued at N6.754 billion traded in 11,127 deals; thus contributing 67.56 per cent to the total equity turnover volume and value respectively. The conglomerate industry followed with 103.226 million shares worth N704.563 million in 954 deals.

The third place was the oil and gas industry, with a turnover of 89.472 million shares worth N353.533 million in 1,479 deals. Trading in the top three equities namely Fidelity Bank Plc, FBN Holdings, and Access Bank Plc (measured by volume) accounted for 390.775 million shares worth N2.021 billion in 3,241 deals, contributing 30.94 per cent to the total equity turnover volume and value respectively.

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