The last Tuesday’s upward review of the Monetary Policy Rate to 12 per cent from 11 per cent by the Central Bank of Nigeria’s Monetary Policy Committee is set to have negative impact on the performance of banking, insurance, consumer goods, industrial goods, oil & gas, among other stocks this week.
Following the 100 basis points hike in the MPR, analysts expect an increased level of activities in the fixed income space, which may consequently impact negatively on investor sentiments towards the equities market.
The equities market had recorded a positive outing last week (+0.80 per cent week-to-date) despite the sell sentiments that pervaded trading activities, thus pegging the year-to-date return at -9.57 per cent.
The Nigerian Stock Exchange All-Share Index advanced on three out of the four trading days last week, with strong negative sentiments observed after the MPC’s upward review of the policy rate, which resulted in a negative outing on the third trading day of the week.
Market breadth favoured the week’s 37 decliners as against 21 advancers, while total market turnover and volume of transactions increased by +14.43 per cent and +43.65 per cent, respectively. Market capitalisation settled at N8.91tn.
The week’s top performer was United Capital Plc (+17.65 per cent) as it closed the week at N2, while Fidelity bank Plc, Nigerian Breweries Plc, Vitafoam Nigeria Plc, and Transnational Corporation of Nigeria Plc recorded respective gains of 14.17 per cent, 12.10 per cent, 10.02 per cent, and 6.25 per cent.
On the flip side, Africa Prudential Registrars Plc (-21.56 per cent), Nascon Allied Industries Plc (-14.21 per cent), Cadbury Nigeria Plc (-14.13 per cent), Tiger Branded Consumer Goods Plc (-12.07 per cent), and Honeywell Flour Mill Plc (-11.11 per cent) led the losers.
Commenting on the expectations for the market this week, analysts at Meristem Securities Limited, said the MPC decision on the MPR last week remained a major game changer.
For the banking stock, they said, “We expect that the sector might record a week-on-week decline this week, as support recedes for prices of some stocks which declared good dividends. Hence, we advise cautious trading by investors, as we are not expectant of many more good results from the banks which are yet to release results.”
For the consumer goods stocks, they said, “The sector continues to endure bearish sentiments from investors, exacerbated by the drab earnings releases amidst unoptimistic macro-economic fundamentals. We advise investors to restrict activities to fundamentally justified counters with considerable upside potentials, while also positioning for the long term.”
For health sector stocks, the Meristem analysts said, “We expect the current negative bias on the sector stocks to continue, as investors remain skeptical in respect of yet to be released corporate financials.”
On insurance stocks, they advised, “We expect the current market trend to be sustained this week, following the weak appetite towards insurance stocks, amidst a dearth of positive news inflows; while for oil and gas stocks, they said, “We do not expect a significant rally on the sector stocks this week, save for news inflows capable of spurring positive investor sentiments.”