Monetary easing, drop in fixed income yield push index by 2.92%

. NSE records best weekly performance in four months
Following a sharp drop in fixed income yields triggered by further monetary easing by the Monetary Policy Committee (MPC), last week, Nigerian equities market recorded its best weekly performance in four months, crossing the 26,000 points for the first time since March 2020.

The development caused the Nigerian Stock Exchange (NSE) All-share index, and market capitalisation to appreciate by 2.92% to close the week at 26,319.34 and N13.755 trillion, respectively. All other indices also finished higher with the exception of the NSE ASeM Index, which closed flat.

Last week, the Monetary Policy Committee (MPC) of the Central Bank Nigeria (CBN), reduced the Monetary Policy Rate (MPR), from 12.5% to 11.5%.

The decision continued to spur activities and triggered a rally in the stock market.

Analysts said the expected third quarter (Q3) earnings reporting season in the midst of the rates crash, and the prevailing low stock valuation have revealed upside potential of companies listed on the stock market.

They pointed out the negative returns on other investment windows propelled the flow of funds into equity assets, especially against the backdrop of the untamed inflationary pressures.

Analysts at Investdata Consulting Limited, said investors and traders are currently positioning amid changing sentiments in the hope of improved liquidity and positive economic indices.

“We expect profit taking as repositioning continues ahead of third quarter-end window dressing and corporate earnings season, despite the negative macroeconomic indices, given the further crash in money market rates, while inflation is at 13.22%, worsening the negative returns on many investment windows

“Also, we see investors focusing on portfolio adjustment and rebalancing by targeting companies with strong potentials to grow their Q3 earnings and dividend on the strength of their earnings capacity as the year last quarter is at the corner.”

Analysts at Vetiva Securities said: “With the influx of liquidity coming into the equities market on the back of the reduction of the MPR by the MPC during the week, investors reacted positively to the announcement, leading to a number of fundamentally sound stocks closing the week higher.

“We expect the positive performance to filter into the coming week as both institutional and retail investors continue to channel their funds into attractive counters. However, given the rally witnessed this week, the possibility of profit taking cannot be overruled.”

Also, Codros Limited said: “We expect the market might continue to benefit as domestic investors seek alpha-yielding opportunities in the face of increasingly negative real returns in the fixed income market. However, we advise investors to trade in only fundamentally justified stocks as the weak macro environment remains a significant headwind for listed companies.”

A review of market activities last week, indicated that the equities market rebounded on Monday, occasioned by bargain-hunting in most blue-chip stocks, causing the All-Share Index (ASI), to advance by 0.31 per cent.

Precisely, the ASI rose by 80.55 absolute points, representing a growth of 0.31 per cent to close at 25,654.90 points. Similarly, the overall market capitalisation gained N43 billion to close at N13.408 trillion.

The upturn was impacted by gains recorded in large and medium capital stocks, including MTNN, Red Star Express, FBN Holdings (FBNH), Dangote Sugar Refinery, and Trans-Nationwide Express.

Following price gains in bellwether stocks on Tuesday, the market sustained a rising profile on Tuesday, and closed on a positive note, causing investors’ wealth to appreciate further by N67 billion.

The ASI increased by 128.12 absolute points or 0.50 per cent to close at 25,783.02 points. Similarly, the market capitalisation gained N67 billion to close at N13.475 trillion

The upturn was impacted by gains recorded in large capital stocks, amongst which are; SEPLAT Petroleum Development Company (SEPLAT), Nigerian Breweries, MTN Nigeria Communications (MTNN), Mobil Nigeria, and Flour Mills of Nigeria.

The rising profile was also sustained on Wednesday, occasioned by gains in most high capital stocks, as investors’ wealth appreciated further by N106 billion.

The ASI rose by 204.12 absolute points, representing a 0.79 per cent growth to close at 25,987.14 points. Similarly, the overall market capitalisation gained N106 billion to close at N13.581 trillion. The upturn was impacted by gains recorded in large and medium value stocks, including the Nigerian Breweries, Mobil Nigeria, Dangote Cement, Lafarge Africa, and Guaranty Trust Bank.
United Capital Plc said the capital market is reacting to the monetary policy action. “As expected, interest for equities has improved and reactions at the bond market also mirrored.

The rising profile continued on Thursday, occasioned by gains in most high capital stocks, as investors’ wealth appreciated further by N106 billion. The ASI increased by 204.12 absolute points, representing a growth of 0.79 per cent to close at 25,987.14 points.

Similarly, the overall market capitalisation gained N106 billion to close at N13.581 trillion.

The upturn was impacted by gains recorded in large and medium capitalised stocks, including Nigerian Breweries, Mobil Nigeria, Dangote Cement, Lafarge Africa, and Guaranty Trust Bank.

United Capital Plc said the capital market is reacting to the monetary policy action. “As expected, interest for equities has improved and reactions at the bond market also mirrored expectations.”

Further breakdown of last week’s trading showed that a turnover of 1.567 billion shares worth N20.559 billion were recorded in 18,396 deals by investors on the floor of the Exchange, in contrast to a total of 1.139 billion units valued at N12.692 billion that changed hands in 17,109 deals during the preceding week.

The financial services industry (measured by volume) led the activity chart with 1.178 billion shares valued at N9.180 billion traded in 9,900 deals; thus contributing 75.14 per cent to the total equity turnover volume. The consumer goods industry followed with 90.002 million shares worth N1.688 billion in 2,715 deals. The third place was the ICT industry with a turnover of 84.667 million shares worth N5.786 billion in 771 deals.

Trading in top three equities namely, Sterling Bank, FBN Holdings Plc, and Zenith Bank Plc. (measured by volume) accounted for 612.805 million shares worth N4.311 billion in 3,739 deals, contributing 39.10% to the total turnover volume.

A total of 119,603 ETPs units valued at N1.228 million were traded this week in 16 deals compared with 143,690 units valued at N1.246 billion transacted a week earlier in 19 deals.

Also, 467 units valued at N564.073.49 were traded this week in five deals compared with a total of 18,803 units valued at N19.581 million transacted in the previous week in eight deals.

About 35 equities appreciated in price during the period, higher than 32 equities, while 28 equities depreciated in price, lower than 31 equities, and 100 equities remained unchanged, same as recorded a week before.