Nigeria: MPC Meeting of to Trigger Equities Trading Pattern

Activities in the Nigerian stock market this week will be focused on the outcome of the highly anticipated Monetary Policy Committee (MPC) meeting to gain further clarity on the movement of yields in the fixed income (FI) market.

Meanwhile, the Central Bank of Nigeria's bi-monthly Monetary Policy Committee (MPC) meeting for the month of May 2021 is scheduled to hold on the 24th and 25th of May, 2021, and capital market analysts believed the new inflation numbers will impact the voting pattern of the committee.

On market outlook, the chief operating officer of InvestData Consulting Limited, Ambrose Omordion said: "we expect the losing momentum on profit taking and selloffs to slow down, in the midst of first quarter (Q1) GDP expectation and outcome of this week's MPC meeting, despite the rising infection rate of the novel coronavirus across the globe and the high yields in the fixed income market.

"We also expect the ongoing vaccination to support global and domestic economic recovery that will support the market and give direction. The banking sector and others remains attractive on the back of the prevailing low prices, despite the Q1 mixed numbers."

Omordion also noted that the market just started a new downtrend as it trades below the 14 and 20-Day Moving Average, noting that, the market may discount the political and insecurity challenges headlines, ahead of half-year earnings reports.

He, however, said, the pullbacks offer bargain hunters and income investors fresh opportunities to reposition in high dividend yields and undervalued stocks, while looking out for quarterly numbers that would support recovery. This is based on the fact that the rising fixed income yields may not be enough to scare all investors away from the equity market.

"Again, the way to go is to target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities. This is especially given the rising oil prices that have so far supported the economy and equity market, despite the seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation," he said.

He added that the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation in the new year.

The founder of Tradelines DotBiz Investment Limited, Mr Tunde Jeariogbe, stated that, "activities on the floor of the Nigerian stock market maintained were bearish despite the adjusted inflation figure released recently. We should understand that in the absence of earnings, the market will respond largely to economic indicators, and since the nation awaits the release of key economic indicators this week, most traders seem to be playing on the safe side."

He stated that the 279th MPC meeting will commence this week and the National Bureau of Statistics(NBS) is also set to release the nation's Gross Domestic Product(GDP) by output on 24th on May, 2021 just as MPC meeting takes off.

According to Jeariogbe, undoubtedly, these two events will chiefly dictate market trend for the rest of second quarter. On the strength of the above, we maintained that traders should play safe, only sound fundamental based equities with standing interim dividend policy should be considered until the coast is clear.

Analysts at Cordros Capital Limited said: "consequently, we see more of a 'choppy theme' as cautious trading dominates the market. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings."

In the new week, analysts at Cowry Asset Management expected the domestic bourse to trade sideways as investors stay on the sidelines to digest first quarter GDP figures to be released in the new week.

Last week, the domestic bourse reversed its uptrend following profit taking in mid and large cap stocks. It appears the devaluation of naira against the USD is yet to attract foreign investors into the Nigerian equities market.

Amid bearish sentiment, the All-Share Index (ASI) contracted week-on week (W-o-W) by 1,157.82 points or 2.93 per cent to close at 38,324.07 points even as the Year-To-Date loss of the local bourse rose to 4.93 pe cent. Similarly, market capitalisation lost N604 billion W-o-W to close at N19.975 trillion.

Sectorial performance was weak. Specifically, the NSE Banking, NSE Insurance, NSE Consumer Goods and the NSE Industrial indices fell by 1.53 per cent, 0.74 per cent, 0.03 per cent and 3.34 per cent to 361.80 points, 203.38 points, 563.43 points and 1,867.06 points respectively. On the positive side, the NSE Oil/Gas index rose by 7.39 per cent to 306.58 points as investors were bullish on Seplat Petroleum Development Company (SEPLAT).

Market breadth for the week was negative as 26 equities appreciated in price, 41 equities depreciated in price, while 93 equities remained unchanged. Eterna led the gainers table by 21.21 per cent to close at N8.00, per share. Prestige Assurance followed with a gain of 15.22 per cent to close at 53 kobo, while Sterling Bank went up by 12.84 per cent to close to N1.67, per share.

On the other side, C & I Leasing led the decliners table by 18.80 per cent to close at N4.06, per share. Royal Exchange followed with a loss of 18.42 per cent to close at 62 kobo and Linkage Assurance declined by 13.04 per cent to close at 60 kobo, per share.

Overall, a total turnover of 1.048 billion shares worth N11.543 billion in 17,233 deals were traded last week by investors on the floor of the Exchange, in contrast to a total of 840.334 million shares valued at N9.561 billion that exchanged hands previous week in 13,239 deals.

The Financial Services Industry (measured by volume) led the activity chart with 674.741 million shares valued at N5.589 billion traded in 9,405 deals; contributing 64.41 per cent and 48.42 per cent to the total equity turnover volume and value respectively. The conglomerates industry followed with 94.524 million shares worth N630.366 million in 828 deals, while ICT Industry traded a turnover of 87.137 million shares worth N630.903 million in 539 deals.

Trading in the top three equities; Zenith Bank, FBN Holdings and Fidelity Bank (measured by volume) accounted for 248.273 million shares worth N3.288 billion in 2,988 deals, contributing 23.70 per cent and 28.49 per cent to the total equity turnover volume and value respectively.

On Exchange Traded Products (ETPs) platform, a total of 5,646 units valued at N623,224 were traded last week in 14 deals compared with a total of 14,477 units valued at N258,795.90 transacted previous week in 4 deals, while on the Bonds market, a total of 80,998 units valued at N81.944 million were traded last week in 22 deals compared with a total of 151,345 units valued at N157.944 million transacted previous week in 75 deals.

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