Financial analysts have predicted a stable capital market condition this week as a result of the decisions of the Monetary Policy Committee of the Central Bank of Nigeria last week.
Yields in the fixed income market are expected to see little or no deviations, while the equities market is expected to remain pressured as has been the case for the period.
“Bearing in mind the decision arrived at by the MPC, we predict yields to hover around the current levels in the short to medium-term. Also, we expect that given the prior direction of investors towards the fixed income market, the equities market may remain pressured,” analysts at Meristem Securities Limited said in the firm’s weekend report.
The analysts also believe that the prevailing high lending rate may discourage loan writing as banks increase participation in the fixed income market.
The Nigerian equities market’s All-Share Index appreciated on three out of the five trading days of last week, accumulating gains of 1.4 per cent week-on-week to push the year-to-date return to -1.38 per cent. Thirty-three stocks appreciated in value as against 26 decliners during the week.
The volume and value of transactions advanced by 608.16 per cent and 205.79 per cent week-on-week, respectively, as a result of a combination of reduced number of trading days in the prior week (two-day public holiday), and an extraordinary trade on Great Nigerian Insurance Plc (2.87 billion shares).
The fixed income market opened the week bullish amidst strong offshore demand as investors geared up for the MPC meeting. After the committee’s decision to keep rates unchanged, the fixed income market turned mixed as yields advanced in the Treasury bills segment on the back of liquidity outflow. However, the market closed the week on a bearish note following further liquidity tightening via Open Market Operation auctions. Overall, yields in the T-bills segment advanced by 37 basis points, while yields in the bond market declined 15 basis points.
The banking sector closed negative for the third successive week, declining by -0.91 per cent week-on-week to peg the year-to-date return at 12.41 per cent. There were 11 gainers, while only two stocks declined in value.
The Meristem analysts noted, “The week-on-week loss may be attributed to the loss recorded on Guaranty Trust Bank Plc. Although, we expect mixed investors’ sentiments this week, we anticipate that the index could record slight gains.
“We attribute the weak consumer goods sector performance to profit-taking activities on counters that witnessed rallies in previous weeks. In the absence of any news to sway market movement, we expect this current trend to subsist this week.
“The industrial goods sector’s performance was driven by continuous bargain- hunting activities on Cutix Plc and Dangote Cement Plc. Barring any news inflow this week, we expect some level of profit-taking on counters with accumulated gains over the past few weeks.”
Analysts at Vetiva Capital Management Limited, in the firm’s weekend report, said, “Notwithstanding the weekly positive return for the ASI, we note that sector performances were mixed across board amidst varied investor sentiments. We expect the mixed sentiment with a bullish bias to persist in the week ahead.
“For the fixed income market, this week, we expect the market to open on a cautious note as the market anticipates further liquidity mop up from the CBN.”