Though, the outcome of the Monetary Policy Committee (MPC) meeting early this week may have helped in giving clarity to the direction of the Nigerian financial markets, but the confidence that investors need to navigate muddy waters of the stock market is still a source of worry.
The Central Bank of Nigeria (CBN) last Tuesday exceeded expectation of many analysts by its decisions at the Monetary Policy Committee (MPC) meeting. The MPC increased the Monetary Policy Rate (MPR) by 100 basis points to 13 percent from 12 percent. Also raised was the private sector Cash Reserve Requirement (CRR) by 500 bps to 20% from 15 percent and moved the Retail Dutch Auction System (RDAS) mid-rate to N168 from N155, and the band around it widened to +/-5%.With year-to-date (ytd) return of Nigerian equities at minus 17.91 percent last Friday, many analysts within the market foresee the stock market to witness a mix of bargain hunting and sell offs.
Despite that many stocks today at the Nigerian bourse are relative in attractiveness as bear reign further discounted their prices, analysts still believe that heightened risks in the country’s economic and political space have dampened investors’ expectations for the market.
“We expect caution to trail the market this week as investors await the outcome of two (2) crucial meetings in the week; the MPC meeting and the OPEC meeting,” say market analysts at UBA Capital plc.
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Last week, the stock market recorded only 19 equities that appreciated in price lower than 51 equities in the preceding week. Also, 50 equities depreciated in price higher than 28 equities in the preceding week, while 132 equities remained unchanged higher than 122 equities recorded in the preceding week.
Also last week, the NSE All-Share Index (ASI) and market capitalisation dropped by 4.11 percent to 33,926.18 points and N11.241 trillion, respectively.
Similarly, all indices depreciated last week with the exception of the NSE Banking Index that rose by 0.34 percent and NSE ASEM Index by 5.78 percent. The summary of price change and movement of market indexes further prove stock investors are cautiously approaching Custom Street. This situation is not likely to better in few weeks time as festive season fast approaches.
“This week, we expect the market to remain unstable and activities dampened due to worries by investors over the nation’s economic and political uncertainties. Nevertheless, the policy outcome of the Central Bank of Nigeria’s MPC meeting will give further direction to the market,” according to investment analysts at Access Bank plc, in their latest market outlook.
“Given the persistent drop in oil prices and consequent depletion of the country’s external reserve, combined with the sustained depreciation of the naira, there has been no positive news inflow to drive the market in recent weeks.
“However, we are of the opinion that the outcome of the MPC meeting and OPEC meeting scheduled to hold next week will directly impact Nigeria’s economic strength as well as sentiments regarding investing in Nigeria,” say market analysts at Meristem Securities.
According to Meristem Securities analysts, “considering that key stocks in the sector historically enjoy foreign investment bias, we envisage a sustenance of the current bearish trend in the sector as most foreign investors continue to sell their holdings in the stocks and flee for safety due to the country’s heightened political and economic uncertainties.
“Although, we note that there are negative sentiments on the horizon which may trigger a further sell- off in the Nigerian equities market, we are upbeat that the sector will rebound in the coming week given that they are fundamentally justified with significant upside potentials at their current prices. Hence, we envisage that astute investors will take positions to enjoy first-mover advantage.”
Iheanyi Nwachukwu
