Investors in the Nigerian equities market faced a setback on February 29, 2024, with an estimated loss of approximately N650 billion as the domestic bourse grappled with significant selling pressure following profit takings.
The selloffs were further intensified by the announcement from the monetary policy committee of the Central Bank, which raised the monetary policy rate to a record high of 22.7%, marking an increase from 18.75%.
Resultantly, the local bourse experienced a decline of 1.16%, culminating in the benchmark index settling at 99,980.30 points.
Notably, the NGX All-Share Index dropped below the 100,000 points thresholds for the first time in over a month, concluding the day at 99,302.57 points.
This decline contrasted sharply with its peak position of 105,722.78 points recorded on Friday, February 16th.
Market analysts attribute this downturn to investors capitalizing on profits following a significant bullish rally observed in recent times.
Moreover, the recent policy rate hike has prompted investors to shift their focus towards fixed-income markets, further impacting equity market performance.
Market performance
Consequently, available statistics from Nairametrics show that the All-Share Index, the broad index measuring the performance of Nigerian stocks, opened the trading month at 101,154.46 index points on February 1, 2024, and closed at 99,980.30 points at the end of the month on February 29. This represents a loss of 1,174.16 basis points or 1.16%.
Further analysis reveals that activities on the Nigerian Exchange Limited (NGX), which opened the trading month with a market capitalization of N55.357 trillion, closed the month at N54.707 trillion, resulting in a month-to-date loss of about N650 billion.
What the analysts are saying
The Managing Director, of Crane Securities Limited, Mr. Mike Eze in a chat with Nairametrics attributed this downturn to investors capitalizing on profits following a notable bullish rally observed in recent times and also the monetary policy rate hike of 22.7% from 18.75%.
He said with the further hike, investors will navigate towards the fixed income space because there is no sentiment when it comes to investment.
- “The purpose is for high return and stability of capital. There is no sentiment attached to it. Investors will further navigate towards fixed income space because it is not favourable. Considering the current CBN MPC announcement on further hiking the rate to 22.7%, there will be negative effects on the market.
- The current bullish trend that we noticed in the last couple of days will revert to a bearish trend. It is the only the conservative investors in the market that will retain their investment in the stocks while watching the trends,” he said.
Eze noted that the market is information and with the current announcement on the rate hike, there will be a further run on the stock market because investors are going to move to the fixed-income segment in order to reap high returns on their investments.
Executive Vice Chairman, of Hicap Securities Limited, Mr. David Adonri also in a chat with Nairametrics said when interest rates rise, investors tend to migrate to fixed-income securities.
He noted that the recent hike will have a negative impact on the market especially on the equity side that just started recovering.
- “The recent hike is expected to further depress the equities market that just started recovering. The hike is likely to reverse the recovery of equities.
- The market will react negatively as investors will find solace in the fixed income segment, but if there are any other sensitive activities after this month, it can change the direction of the market,” he said.
