by Chinwendu Obienyi
For the second consecutive week, bearish sentiments persisted at the Nigerian stock market as investors’ wealth depreciated by N663 billion.
Market experts had predicted that the trading week would be mixed with bargain hunting and profit taking by investors. However, at the close of trading on Friday, the All Share Index (ASI) fell by 3.04 per cent to close at 40,439.85 points which is the biggest weekly fall in eight years.
In the same vein, the market’s year-to-date (ytd) return moderated sharply to 0.4 per cent while market capitalisation shed N663 billion to close the week at N21.156 trillion. Analysis of the performance of the market showed that the weekly loss was due to notable sell-offs in GT Bank, BUA Cement, Dangote Cement and Zenith Bank.
Furthermore, sectoral performance was broadly negative as all sectors closed in the red. The Banking (-8.8 per cent) index led the losers chart followed by Insurance (-6.5 per cent), Industrial Goods (-5.7 per cent), Oil and Gas (-1.0 per cent) and Consumer Goods (-0.9 per cent) indices.
According to market experts who spoke with Daily Sun, investors had become worried about the uptick in yields in the fixed income market and with stop rates rising by 105 basis points to 2.33 per cent (from 1.28 per cent at the last auction of the Nigerian Treasury Bills (NTB), investors’ mood towards equities during the week was weak.
Commenting on the performance of the market, Chief Executive Officer, Highcap Securities, David Adonri, linked the bearish performance to investors exiting the market.
According to him, the Central Bank had adopted a reduction-in interest rate –policy and so a lot of people that usually invest in debt instruments discover that the interest rate was too low and some of them moved into equities and foreign exchange markets which in turn heated the market.
“Now that overheating has plunged the economy into serious escalated inflation such that the CBN is now worried. Secondly, these investors do not trust that full year results from quoted companies on the NSE would be spectacular and this is because year 2020 was not that good enough due to the COVID-19 pandemic. So a lot of them have now decided to sit back or exit the market to watch what would happen which is why we are experiencing the bears”, he explained.
For their part, analysts at Cordros capital, said that with the latest outcome of the NTB auction pointing towards yield elevation in the near term, they expect investors to trade cautiously while taking positions in stocks with attractive dividend yields.
“We expect the local bourse to exhibit a zig-zag pattern in the near term as the opposing forces of uptick in yields and full year 2020 corporate earnings releases dictate market performance. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings”, they said.
Meanwhile, a total turnover of 2.683 billion shares worth N23.662 billion in 27,844 deals were traded this week by investors on the floor of the Exchange, in contrast to a total of 2.767 billion shares valued at N29.685 billion that exchanged hands last week in 31,380 deals.
The Financial Services Industry (measured by volume) led the activity chart with 2.032 billion shares valued at N13.416 billion traded in 14,832 deals; thus contributing 75.74 and 56.70 per cent to the total equity turnover volume and value respectively.
The Consumer Goods Industry followed with 181.766 million shares worth N3.601 billion in 4,676 deals while the Conglomerates Industry recorded a turnover of 175.085 million shares worth N324.006 million in 1,168 deals.
Trading in the top three equities namely Living Trust Mortgage Bank Plc, First Bank Holding Plc and Zenith Bank Plc (measured by volume) accounted for 1.208 billion shares worth N6.580 billion in 3,785 deals, contributing 45.02 and 27.81 per cent to the total equity turnover volume and value respectively.