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HomeExecutive BriefHow MPC interest rate hike troubling Nigeria's equity market

How MPC interest rate hike troubling Nigeria’s equity market

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On Tuesday, the local bourse continued in a downward spiral shedding further as investors’ sentiment toward the equities market continued to diminish following the 100bps MPR hike by the MPC in its recently concluded meeting.

Important to note is the fact that significant sell pressure in MTNN (-9.6 per cent), ZENITHBA (-3.2 per cent), and NB (-4.5 per cent) contributed the most to the index’s decline in Tuesday’s trading session, as investors sought to take advantage of the rising yield environment in the fixed income space.

That said, the NGX-All Share Index (NGX-ASI) shed 1.9 per cent to close the day at 50,442.4points, with market capitalisation losing N958.2 billion to close at N27.2 trillion.

As a result, the bourse’s YTD return moderated to 18.1 per cent. Activity level showed improvement as volume and value of shares traded climbed by 58.0 per cent and 17 per cent to settle at 156.2 million shares and N2.9 billion worth of stocks traded.

On a sectoral level, performance reflected an overall bearish investor sentiment across all the four (4) sectors out of the five (5) sectors we cover, with the remaining sector closing flat.

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The Banking sector (-1.9 per cent) led the laggards, owing to significant sell-pressure across ZENITHBA (-3.2 per cent), ACCESSCO (-1.1 per cent), UBA (-1.4 per cent), and FIDELITY (-1.2 per cent).

Trailing behind were the Insurance (-1.7 per cent), Consumer goods (-1.3 per cent), and the Oil & Gas (-0.5 per cent) sectors, owing to share price depreciation in AIICO (-4.8 per cent), CHIPLC (-8.8 per cent), PRESTIGE (-4.8 per cent), NB (-4.5 per cent), INTBREW (-9.9 per cent), FLOURMIL (-3.0 per cent), PZ (-9.6 per cent), and OANDO (-3.1 per cent).

The Industrial sector, however, closed flat in yesterday’s trading session.

As assessed by market breadth (gainers to losers’ ratio), investor sentiment continued moderation to 0.1x in Tuesday’ trading session, from 0.6x, as three (3) tickers showed advancement while thirty-six (36) tickers declined.

Looking ahead to the rest of the week, we expect extended sell pressure across stocks in the local bourse as investors will continue to switch assets, considering the climbing interest rate environment.

However, we maintain that investors and fund managers will continue to cherry-pick stocks with good fundamentals, as the H1-2022 earnings season has already commenced.

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