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Sell pressure ahead of MPC meeting triggers high stock volatility

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Investors lose N512b in five trading days

Sell pressure ahead of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting has triggered high volatility of equities trading at the Nigerian Exchange Limited (NGX).

The all-share index (ASI) and market capitalisation depreciated by 2.93 per cent or N521 billion to close the week at 38,324.07 and N19.975 trillion.

Similarly, other indices finished lower except NSE Oil and Gas, NSE Growth and NSE Sovereign Bond indices which appreciated by 7.39 per cent, 0.62 per cent and 3.02 per cent respectively.

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Analysts predicted a gloomy outlook this week, as investors adopt a ‘wait and see’ approach ahead of any catalyst that will trigger growth.

Analysts at Afrinvest Securities said:” In the coming week, we expect the bearish sentiment to continue in the absence of any positive catalyst.

Codros Capital said:” In the week ahead, we believe investors will be focused on the outcome of the highly-anticipated MPC meeting to gain further clarity on the movement of yields in the FI market.

“Consequently, we see more of a ‘choppy theme’ as cautious trading dominates the market. Notwithstanding, we advise investors to take positions in only fundamentally-justified stocks as the weak macroeconomic outlook remains a significant headwind for corporate earnings.”

Also, Vetiva Dealings and Brokerage said: “We expect the market to follow a similar pattern next week, with investors adopting a wait-and-see approach in the market ahead of any major catalyst to move the market in either direction.”

A breakdown of activities last week showed that the domestic equities market reopened on Monday with a 0.44 per cent loss, following depreciation in many high capitalised stocks.

Specifically, the ASI decreased 175.42 basis points, representing a decline of 0.44 per cent to close at 39,306.47 basis points. Similarly, the overall market capitalisation value lost N92 billion to close at N20.487 trillion. Sector performance was broadly negative with the banking, consumer goods and industrial sectors closing in the red.

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The downtrend was driven by price depreciation in medium and large capitalised stocks amongst which are; Nigerian Enamelware, MTN Nigeria Communications (MTNN), Stanbic IBTC Holdings, BUA Cement and Lafarge Africa.

Trading activities on the stock market closed on a downward note, to extend the bearish sentiments to two consecutive trading days, as the ASI dipped by 0.72 per cent.

The ASI dropped by 283.95 points, representing a decline of 0.72 per cent to close at 39,022.52 points. Also, market capitalisation depreciated by N148 billion to close at N20.339 trillion

The downturn was driven by price depreciation in large and medium capitalised stocks amongst which are; BUA Cement, Portland Paints & Products Nigeria, SCOA Nigeria, FBN Holdings and Zenith Bank.

Market sentiment, as measured by market breadth, closed negative as 16 stocks appreciated while 22 others constituted the losers’ chart.

Further analysis of last week’s activities showed that a total turnover of 1.048 billion shares worth N11.543 billion was recorded in 17,233 deals by investors on the floor of the exchange, in contrast to a total of 840.334 million shares valued at N9.561 billion that changed hands in 13,239 deals during the preceding week.

The financial services industry led the activity chart with 674.741 million shares valued at N5.589 billion traded in 9,405 deals; thus contributing 64.41 per cent to total equity turnover.

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The conglomerate industry followed with 94.524 million shares worth N630.366 million in 828 deals. The third place was ICT Industry, with a turnover of 87.137 million shares worth N630.903 million in 539 deals.

Trading in the top three equities namely Zenith Bank Plc, FBN Holdings Plc and Fidelity Bank Plc accounted for 248.273 million shares worth N3.288 billion in 2,988 deals, contributing 23.70 per cent to the total equity turnover.

A total of 5,646 units of Exchange Traded Products (ETPs) valued at N623,224 were traded ĺast week in 14 deals compared with a total of 14,477 units valued at N258,795.90 transacted in four deals during the precedent week.

Also, 80,998 units of bonds valued at N81.944 million were traded last week in 22 deals compared to a total of 151,345 units valued at N157.944 million transacted in 75 deals during the preceding week.

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