Bearish sentiments have resurfaced in the Nigerian stock market, as investors responded to the recent increase in the Central Bank of Nigeria (CBN)’s Monetary Policy Rate (MPR), which serves as the benchmark interest rate for lending by banks and other financial institutions.
The CBN’s Monetary Policy Committee (MPC) raised the MPR by 50 basis points last week, bringing it to 27.25% from 26.75%, in an effort to combat inflation, currently at 32.15%.
Analysts noted that investors reacted accordingly, focusing on fixed income securities, whose yields are anticipated to rise following the MPR hike. They also highlighted that attention is shifting towards the upcoming Q3 2024 earnings reporting season, expected to introduce seasonality and sentiments that could help discerning investors capitalize on the last quarter’s volatility to create wealth.
Last week’s trading analysis revealed that the Nigerian Exchange (NGX) All Share Index (ASI), a key stock indicator, dropped by 47 basis points (or 0.5%), closing at 98,523.56 points, down from 98,247.99 points the previous week. Similarly, market capitalization decreased to N56.61 trillion, down from N56.45 trillion the prior week, resulting in a loss of N266.55 billion for investors. Consequently, the Month-to-Date and Year-to-Date returns have moderated to 2.0% and 31.8%, respectively.
Commenting on the market outlook, analysts at InvestData Consulting Limited stated: “We expect mixed sentiment to persist due to profit-taking and portfolio rebalancing ahead of quarter-end window dressing and the Q3 earnings session. Sector rotation is also ongoing in the market, with investors seizing opportunities to buy into value during pullbacks.”
They emphasized that despite the current volatility and pullbacks, there remains potential for upside growth. Consequently, investors are encouraged to take advantage of price corrections while considering trends and events occurring both globally and domestically