Stock investors realign portfolios ahead of MPC outcome

Selling pressure and profit taking characterised the equities market last week as investors continued to realign portfolios ahead of the Central Bank of Nigeria, CBN’s, Monetary Policy Committee, MPC, meeting which will commence today.

Analysts also noted that investors are digesting the February 2023 Consumer Price Index, CPI, and the new Treasury Bills, TB, rates after the last primary market auction, as maturing offers provide more liquidity in the system.

The expectation of more audited corporate earnings and qualification dates for dividends, as well as price adjustments for dividends are likely to sustain bargain hunting in the market.

Analysis of trading last week showed that sell pressures on MTN Nigeria led to a 4.2% price drop and GTCO 7.2%, thus dragging the benchmark Index lower. Consequently, the Nigerian Exchange Limited, NGX All-Share Index, ASI dipped by 1.5% Week-on-Week, WoW, to close at 54,935.20 points. Accordingly, the Month-to-Date, MtD and Year-to-Date, YtD, returns moderated to -1.6% and -7.2%, respectively.

Analysing activity levels, trading volume, and value weakened by 16.6% WoW and 41.4% WoW, respectively. Across sectors, the Banking Index declined by 4.6% Insurance Index 2.4% and Industrial Goods Index 0.3% while Consumer Goods Index gained 1.4% as the Oil and Gas index closed flat.

Commenting on market outlook, analysts at Cordros Research said: “Looking ahead, we believe investors will focus on the outcomes of the bond auction and the MPC meeting scheduled to hold this week beginning from Monday to gain further clarity on the movement of yields in the Fixed Income, FI market. If the MPC increases the benchmark policy rate and there is a pass-through impact on yields in the FI market, there could be a realignment of investments between markets that would pressure the performance of the equities market. As a result, we expect cautious trading from domestic investors in the short term. Overall, we reiterate the need for positioning in only fundamentally sound stocks as the uninspiring macro story remains a significant headwind for corporate earnings.”

Reacting as well analysts at InvestData Consulting Limited stated:”We expect the mixed trend to continue as players digest CPI data and TB rates ahead of MPC meeting and more earnings reports in the midst price markdown for dividend. Income investors target dividend paying companies and defensive stocks to protect their portfolios ahead of the governorship election and post dividend adjustment. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.”