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Profit-taking heightens amid fears of MPR adjustment

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Nigerian Stock Exchange

Index depreciate by 0.42%, as analysts urge caution
As investors await the outcome of the next Monetary Policy Committee (MPC) meeting, amid fear of possible adjustment in rate, sentiments turned bearish as profit-taking dominated market performance at the equity sector of the Nigerian Stock Exchange (NSE) last week.

The development caused the NSE All-share index and market capitalisation to depreciate by 0.42 per cent and 0.38 per cent to close the week at 41,001.99 and N21.449 trillion, respectively.

Similarly, all other indices finished lower with the exception of NSE MERI Growth, which appreciated by 0.12 per cent while the NSE ASeM and NSE Growth Indices closed flat.

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Analysts linked the persistent profit-taking last week to fear that was heightened by the latest FGN Bonds which reopened on adjusted and juicier rates for long-tenured bonds.

According to them, this signals the possibility of a change in monetary policy, depending on the voting pattern of MPC members during their first meeting for the year, holding this week.

The Chief Research Officer, Investdata Consulting, Ambrose Omodion, noted that aside from the mid-week session, the market posted marginal losses during the other trading days.

“Looking at the rate and pattern of profit-booking across the market, one can safely conclude that investors in the market are undecided and playing cautiously, undecided about the next direction of the NSE’s composite All-Share index

“The rising inflation rate has been a threat to the prevailing low interest rates regime which requires the urgent attention of the fiscal and monetary authorities, even as the economy awaits policies that will drive recovery and growth this year.

“Nevertheless, given the trading pattern and sharp uptrend that brought the key performance index to this current level, we once again, suggest that investors should take profit in positions they have made between 15-30 per cent so far and wait to re-enter later. ”

Analysts at Codros Capital said: “In the week ahead, we expect investors’ attention to be centred on the outcome of the first MPC meeting of the year. We believe consensus expectation for a HOLD decision if confirmed will engender positive market performance as investors cherry-pick stocks with attractive dividend yields amid negative real returns in the fixed income market.

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“However, we advise investors to take positions in only fundamentally-justified stocks as the fragility of the macroeconomic environment remains a significant headwind for corporate earnings.” A breakdown of market activities for the week showed that renewed profit-taking in some high value stocks, halted a five-day rally on the NSE, as market capitalisation fell by N39 billion.

At the close of transactions Monday, the ASI shed 93.76 absolute points or 0.23 per cent loss to close at 41,082.38 points. Accordingly, investors lost N39 billion in value as market capitalisation depreciated to N21.491 trillion.

The downturn was impacted by losses recorded in medium and large capital stocks, including Dangote Cement, Flour Mills of Nigeria, Guinness Nigeria, NASCON Allied Industries, and FBN Holdings (FBNH).

Nigerian equities market extended negative sentiments at the end of Tuesday’s transactions on the trading floor of the NSE, causing the ASI depreciate further by 0.07 per cent.

The ASI shed 30.75 absolute points, representing a loss of 0.07 per cent to close at 41,051.63 points. Accordingly, investors lost N16 billion in value as market capitalisation slipped to N21.475 trillion.

The downturn was impacted by losses recorded in medium and large value stocks, including Ardova Plc, BUA Cement, UAC of Nigeria (UACN), Access Bank, and Red Star Express.

NSE reversed two days losses to close upbeat on Wednesday, as investors renewed interest in insurance stocks.

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At the close of trading, market capitalisation appreciated by N50 billion to close at N21.525 trillion. ASI also grew by 96.09 absolute points, representing an increase of 0.23 per cent to close at 41,147.72 points.

The market gain was driven by price appreciation in large and medium capitalised stocks such as Lafarge Africa, Ardova Plc, BOC Gases, Northern Nigeria Flour Mills (NNFM), and Flour Mills of Nigeria.

Market sentiment, as measured by market breadth, was positive, as 55 stocks gained, relative to 16 losers. Deap Capital Management & Trust, Mutual Benefits Assurance, NNFM, Niger Insurance, Royal Exchange and Sovereign Trust Insurance recorded the highest price gain of 10 per cent each, to close at 22 kobo, 55 kobo, N8.80, 33 kobo, 44 kobo and 33 kobo.

Transactions on the equity sector of the NSE closed on a downward note on Thursday, occasioned by profit taking in most blue-chip stocks, causing the ASI to dip by 0.12 per cent.

At the close of trading, the ASI plunged by 48.57 points, representing a decrease of 0.12 per cent to close at 41,099.15 points. Also, market capitalisation depreciated by N26 billion to close at N21.499 trillion.

The downtrend was driven by price depreciation in large and medium capital stocks amongst which were; MRS Oil Nigeria, Cadbury Nigeria, Flour Mills of Nigeria, Dangote Cement, and Guinness Nigeria.

Sentiment, as measured by the market breadth, closed negative as 50 stocks lost, relative to 14 gainers.

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Last week, a turnover of 4.288 billion shares worth N25.989 billion was recorded in 32,849 deals were by investors on the floor of the exchange, in contrast to a total of 3.447 billion units valued at N32.725 billion that exchanged hands in 30,327 deals during the preceding week.

The financial services industry (measured by volume) led the activity chart with 2.607 billion shares valued at N12.454 billion traded in 15,128 deals; thus contributing 60.81 per cent to the total equity turnover volume and value respectively.

The conglomerates Industry followed with 813.813 million shares worth N1.561 billion in 2,417 deals.

The third place was Oil and Gas Industry, with a turnover of 212.126 million shares worth N821.978 million in 2,726 deals.

Trading in the top three equities namely Transnational Corporation of Nigeria, Living Trust Mortgage Bank Plc, and Japaul Gold and Ventures Plc (measured by volume) accounted for 1.582 billion shares worth N1.564 billion in 2,726 deals, contributing 36.9 per cent and 6.02 per cent to the total equity turnover.

About 53 equities appreciated in price during the week, lower than 60 equities in the preceding week, while 29 depreciated, higher than 19 equities in the previous week, and 79 equities remained unchanged, lower than 82 recorded in the previous week.

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