Last week witnessed a notable correction in the local bourse, marking the first downturn in 16 weeks, propelled by sell sentiments, particularly from institutional investors.
The benchmark index plummeted by a substantial 2.45 percent week-on-week to 101,858.37 index points, as profit-taking activities dominated the market amidst weak breadth and elevated volatility.
Consequently, the year-to-date return of the index settled at 36.22 percent, contributing to a 2.59 percent weekly decline in the market capitalization of listed equities to N55.74 trillion coupled with the recent delisting of GlaxoSmithKline’s shares from the daily official list of the NGX.
This resulted in a total of N1.42 trillion being wiped off the market as investor sentiment waned across the board.
Speaking on the downturn, stock market analysts at Cowry Assets said, ‘’the motive behind this shift in sentiment appears to be portfolio rebalancing for safety. This adjustment precedes the expectations set for the Monetary Policy Committee (MPC) meeting this month and follows the recent surge in treasury rates to a nearly 7-year high. This portends that the Central Bank of Nigeria (CBN) is signaling a return to orthodox monetary policy tools to curb inflation and the move to entice foreign investors back into Nigeria’s economy adds to the backdrop.’’
The level of trading activity in the review week was lackluster as investors’ sentiment levels reflected negative market breadth. As a result, the weekly total traded volume decreased by 36.34 percent week on week to 2.48 billion units, with the number of trades nose-diving by 20.45 percent week on week to 54,982 deals. In the same vein, the weekly traded value plunged by 49.70 percent to N47.86 billion.
Sectoral performance for the week exhibited a negative trend, with all five sectors experiencing sharp downturns. The Banking and Industrial indexes led the losses, declining by 6.86 percent and 4.16 percent, respectively. This was primarily driven by price drops in key stocks such as FBNH, GTCO, ZENITH, WAPCO, and JULIUS BERGER. Following closely were the Insurance, Oil & Gas, and Consumer Goods indexes, recording gains of 1.48 percent, 0.40 percent, and 0.14 percent week-on-week losses, driven by negative price movements and sell interest in SUNUASSUR, NB, FLOUR MILL, OANDO, ETERNA, AIICO, and MTNN.
Top-performing stocks at the close of the week included MEYER (+61%), JULI (+44%), GEREGU (+19%), MRS (+7%), and BUAFOODS (+4%).
On the flip side, stocks like ETERNA (-19%), ABBEYBDS (-18%), MBENEFIT (-18%), STERLING (-16%), and FIDELITY (-15%) experienced declines in their share prices, respectively.
This week, stock market analysts anticipate the current bearish trend to persist as investors seek refuge in fixed–income instruments due to the high yields as seen recently amid dividend expectations and high market volatility ahead of the January Consumer Price Index (CPI) data from the NBS and the impending Monetary Policy Committee meeting this February.
However, a pullback at this juncture is expected to strengthen upside potential. Amidst all these, we continue to advise investors to take positions in stocks with consistent track records of dividend payments and strong fundamentals and growth prospects to support earnings growth.
Sentiments were broadly positive in the global equities market as investors digested the latest batch of earnings updates and continued to assess the potential actions of global central banks regarding interest rates while awaiting the revised US inflation print due on Friday.
Accordingly, US equities (DJIA: +0.2%; S&P 500: +0.8%) edged up, supported by positive earnings, most notably from entertainment giant, Walt Disney. European equities (STOXX Europe: +0.3%; FTSE 100: -0.3%) remained mixed as higher bond yields offset positive reactions to strong corporate earnings. In contrast, Asian markets (Nikkei 225: +2.0%; SSE: +5.0%) recorded positive performances, attributable to (1) the weaker yen and robust earnings in Japan and (2) reports of increased purchases of ETFs linked to Chinese stocks by a sovereign fund to support the market.
These actions come in the wake of additional support measures implemented by Chinese policymakers in recent weeks, including reductions in reserve requirements for banks and stricter regulations on short sales.
The Emerging market (MSCI EM: +0.9%) index closed higher, led by the positive sentiments in China (+5.0%), while the Frontier market (MSCI FM: -0.2%) index settled lower due to losses in Iceland (-1.7%)
