Stock market declines, investors lose N1.3trn in February


8 elite companies control nearly half of stock market with N11trnThe Nigerian equities market witnessed a volatile and bearish run in February on the Nigerian Exchange Limited, NGX, as investors lost N1.3 trillion of their investment.

Also, the benchmark NGX All Share Index, ASI, halted four consecutive months of growth in the midst of high selling sentiment and oscillation.

Specifically, in the month of February, 2024, the NGX market capitalisation, which represents the total value of investment owned by investors, declined to N54.035 trillion on Friday from N55.357 trillion it closed on 31, January 2024.
In similar manner, the ASI dropped to 98,751.98 points from 101,154.46 points, indicating 2.4% depreciation.

On weekly basis analysis, the equities market lost ground for another week as investors responded unfavourably to the Monetary Policy Committee’s (MPC) meeting outcome.

Specifically, investors lost N1.8 trillion of their investment, as market capitalisation declined to N54.035 trillion from N55.861 trillion the previous week.

Further analysis showed that there was a notable sell-off on Tuesday, as ASI declined by 1.4% intensified by the MPC’s announcement of a record-high  Monetary Policy Rate, MPR of 22.75% (400 bases points, bps).

This is despite the bullish opening in January, being the post- election year that was short-lived by profit taking and selloffs in reaction to higher yield outlook in the fixed income market and the hawkish move of the central bank.
Meanwhile, despite attempts by investors to capitalize on the market’s downturn later in the week, the gains were insufficient to offset the losses. Accordingly, sell pressures on MTN Nigeria led to its price declining by 18.9% and BUA Cement  dropping by 10.0% to trigger a 3.3% Week on Week,  W/W, decline in ASI to close at 99,765.90 points from 102,088.30 points the previous week.

Consequently, the Month to Date  MtD and  Year to Date,YtD returns settled at 0.1% and 38.0%, respectively.

Activity levels were positive as trading volume and value increased by 36.7% W/W and 8.1% W/W, respectively. Sectoral performance was broadly negative, following losses in the Industrial Goods  recording a decline by 3.9%, Insurance 3.4%, Consumer Goods 2.6%, Oil and Gas 1.6%  and Banking 0.7% respectively.

Reacting to the market development, analysts at Cordros Research stated: “In the near term, we anticipate cautious trading from domestic investors in response to the recent interest rate decision by the MPC and the uninspiring corporate earnings released thus far.”

Reacting as well, analysts at Investdata Consulting Limited, said : “Looking at the negative performance by companies that have so far presented their audited results, a reflection of the gloomy and contracting economy.”

On market outlook, the analysts stated: “Mixed trend is expected to continue in the new month, even as the market outlook remains mixed and dicey, due to the prevailing weak earnings, or pullbacks that may happen in the new month as a result of selloffs. The anticipated correction in the new month, or after, will strengthen recovery.  Despite the high inflation, insecurity and headwinds opportunities, as good dividend payout and recovery oil prices will further boost market fundamentals.

But investors at this point should not be greedy. Instead, your decisions must be guided by investment goals and trading strategies, even as  inflow of funds into the equity assets is mixed due to higher rates in money market is likely to continue even as we look forward to MPC meeting in the new month.”

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