THE Nigerian stock market saw the worst weekly decline in 10 weeks following the Central Bank of Nigeria (CBN) benchmark interest rate hike, leaving investors to N1.32 trillion loss.
At the end of its by-monthly monetary policy committee (MPC) meeting held on Monday, July 22, and Tuesday, July 23, the CBN raised the interest rate by 50 basis points to address surging inflation which stood at 34.19 per cent in June.
Inflation has been stoking Nigeria’s economy and businesses, worsening citizens’ hardships as the prices of food prices, energy, and essential commodities have skyrocketed in the last one year.
At the close of the trading session of Friday, July 26, the stock market capitalisation depreciated by 2.33 per cent to N55.605 trillion while the All-Share Index fell to 98,201.49 basis-point, after opening at N56.929 and 100,539.40 basis-point respectively.
The dip in stocks trading last week left investors with a loss of N1.32 trillion, representing the worst decline in the last 10 weeks.
Analysis of market activities revealed six weeks of losses since May 20.
It showed that the apex bank’s MPC decision of May 21 waned investors’ sentiment and dipped the market capitalisation by N29 billion, representing the second stock market crash in 10 weeks.
Investors lost N4 billion in the week of June 3 to 7; N10 billion in the week of June 17 to 21; N2 in the week of July 1 to 5; and N14 billion in the week of July 8 to 12.
Stock market analysts say rate hikes negatively impact the stock market, lower investors’ confidence, and create negative sentiment for stocks.
“If MPR increases, the rate at which the government wants to borrow money from investors will rise. This will now make investors dump the stock market and shift their portfolios from higher-risk stocks to the fixed-income market, where bonds and other fixed-income assets are bought and sold,” an investment and portfolio analyst, Abel Ezekiel, told The ICIR.
Last week’s trading activities reflect the negative sentiment and investors’ reaction to the recent interest rate hike by the apex bank and the continued positive outlook of the fixed income and money market space, said analysts at Cowry Assets Management.
The sentiment is expected to persist in the coming week as market players continue to digest the outcome of the CBN interest rate hike and recent economic data.
“The continued rise in yield levels within the fixed income and money market spaces is likely to maintain the unattractiveness of equities, as investors opt for the appealing yields,” the analysts said.
A mildly positive performance, however, is expected on the back of continued earnings releases and attractive dividend declarations by corporations in the coming week.
“As the market structure and fundamentals evolve, investors are advised to position themselves in stocks with sound fundamentals to navigate the prevailing conditions effectively,” the Cowry analysts stated.
Other market highlights
Dangote Cement, Eterna, and Cutix were among the top ten companies that closed in the red. At the close of the week’s trading, the share price of Dangote Cement fell from N656.70 to N591.10, losing N65.60.
Eterna lost N1.80 to close at N16.20 from N18.00, and Cutix shed 84 kobo to N5.15 from N5.99.
On the positive side, the share price of Julius Berger Nigeria gained N9.50 to close at N97 from N87.50; Oando N2.10 to close at N20.35 from N18.25; and UAC of Nigeria 65k to close at N15.80 from 15.15.
In the just concluded week, a total turnover of 3.557 billion shares worth N47.22 billion in 42,871 deals was traded by investors on the floor of the Nigeria Exchange Limited (NGX).