Broadstreet Tempers Stocks Buying as Interest Rate Runs Ahead Inflation
What is driving sell pressures in the equities market? Stockholders combined wealth fell by more than N460 billion due to sell pressures. The value of all listed went down more than that but latest new shares listed by Ellah Lake and Fidelity Bank Plc reduced the heat.
Investors appear to have shifted attention to fixed income markets, where yields are nearing boiling points. Since inflation started to run behind interest rate benchmark, the Broadstreet mood has changed.
Investors continue to take negative actions on stocks. The sell down pressures have impacted the equities market performance significantly.
Just last week, the market value of all stocks listed on the Nigerian Exchange, NGX, declined sharply week on week due to sell pressures. This happened despite whirlwind of earnings announcement, dividend proposal and mandatory takeover and of course shares listing.
Attractive valuations, and some corporate actions failed to upturn equities investors’ negative sentiment, reflecting 4 days selling rallies in the just concluded week. Sentiment shifted across sectorial indexes since inflation rate starts running behind Nigeria’s benchmark interest rate.
Real return on naira assets stoked the ongoing sell down in the local bourse, plus yet untamed pressures associated with the devaluation of naira. After the consumer price index rebasing exercise, the new data showed a sharp moderation in inflation to 24.48% in January 2025, down from 34.8% in December 2024.
This significant decline, coupled with expectations of further moderation in the course of the year, fueled strong buying interest from investors, leading to notable yield compression in February, CardinalStone Partners Limited told investors in a report.
The investment firm said its outlook for yields is still biased to the downside, especially given that liquidity of about N4.5 trillion will hit the system in March. Last week, the local equities market closed the week in bearish territory, with losses recorded in all sessions except Thursday.
Sell pressure dominated banking tickers, including FIRSTHOLDCO, GTCO, UBA, ACCESSCORP, FIDELITYBK, and ZENITHBANK, before a mid-week correction as investors saw buying opportunities, AIICO Capital Limited said in a note.
Ticker: TRANSCORP market price climbed ahead of its board meeting but faced a selloff on Friday due to market disappointment. Losses in MTNN, STANBIC, and DANGSUGAR also weighed on the market, leading to a 119bps decline in the All-Share Index.
UCAP rebounded after an initial slump on Monday. Offshore investors maintained strong interest in GTCO, ZENITHBANK, and OKOMUOIL.
Notably, NGXGROUP hit a new 52-week high of ₦33.00, while corporate actions from GUINNESS, FIDELITYBK, and Wema Bank drove market activity.
“We anticipate market participants will stay cautious, though interest may emerge at attractive entry points amid earnings releases and potential corporate actions.” AIICO Capital Limited told investors in a note. #Broadstreet Tempers Stocks Buying as Interest Rate Runs Ahead Inflation#
