Stocks: Banking, other indices plunge as MPR goes up

THE banking sector index rose by 0.93 per cent to close at 436.95 basis points (bps) in last week’s trading session, as investors worry over implications of the increase in monetary policy rate (MPR) on stocks.

Except for the oil and gas index which closed flat, the other sector indices – insurance, consumer goods and industrial – fell during the week’s trading session.

Trading had opened on the floor of the Nigerian Exchange Limited (NGX) on Monday, March 20 and closed on Friday, March 24.

But at the end of the trading session, the All-Share Index (ASI) and market capitalisation fell by 0.04 per to close at 54,892.53bps and N29.903 trillion respectively, to sustain a downward movement in the market for the second consecutive week.

The consumer goods index suffered the highest drop by 0.74 per cent to close at 696.17bps. While the insurance index fell by 0.53 per cent to close at 174.7bps, the industrial index shed 0.49 per cent to close at 2,539.31bps.

Amid the negative performances, the banking index rose from 432.92bps to close at 436.95bps. Zenith Bank, Access Holdings, FBN Holdings, Guaranty Trust Holding, Fidelity Bank and Jaiz Bank were the stocks that gained, while other banking stocks fell or closed flat.

Zenith gained 0.35k to close at N24.95; Access, 0.25k to N8.65; GTCO, 0.3k to N24.9; FBNH, 0.2k to N10.9; Jaiz Bank, 0.02k to 0.91k; and Fidelity, 0.01k to N5.2.

The Central Bank of Nigeria (CBN) had at the conclusion of its two-day monetary policy committee (MPC) meeting of March 20 and 21, raised the MPR by 50bps to 18 per cent. MPR is usually the rate at which the central bank is willing to lend money to commercial banks. It consequently influences banks’ lending rate to their customers.

In a chat with The ICIR, the National Chairman of the Progressive Shareholders Association of Nigeria (PSAN), Boniface Okezie, said the raise in MPR was not good for the industry.

Okezie believed, however, that despite the rate increase, banking stocks would be on demand.

“The banking sector still has a lot to offer to investors in terms of good dividends, coming from the likes of Zenith, GTCO, Stanbic IBTC, UBA, Access and other good banks,” he said.

He also expressed concern over the naira redesign policy of the central bank, stressing that it has badly affected the capital market.

    “There is no money. How can people invest in the capital market because one must first find money to eat before he can plan to invest or put money in the bank?

    “It is, indeed, a bad time for Nigerians and the capital market, the worst that has ever happened to Nigeria since we returned back to democratic rule in 1999,” Okezie added.

    As investors digest the outcome of the MPC meeting and its probable impact on the economy and markets, analysts at Cowry Asset Management, in their Weekly Financial Market Review, stated, “However, we advise investors to trade companies with sound fundamentals and, as such, should take advantage of price corrections in line with domestic and global trends.”

    Meanwhile, a total turnover of 1.689 billion shares worth N11.07 billion in 14,019 deals was traded during the week by investors, in contrast to a total of 853.745 million shares valued at N11.84 billion in 18,543 deals that exchanged hands in the week before.

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