Equities market depreciates by N429bn in Sept amid economy uncertainty

The equities market of the Nigerian Exchange Limited (NGX) depreciated by N429billion in September 2022 as the country’s economy continued to face uncertainty over the build-up to the 2023 general elections

The market capitalisation closed September 30, 2022 at N26.451 trillion, a decline of 1.6per cent or N429billion from N26.880trillion it opened for trading, while NGX All-Share Index depreciated by 1.63 per cent to 49,024.16 basis points from 49,836.51 basis points it opened for trading in the month under review.

Although the market had gained 14.77 per cent in its Year-till-Date performance, but since July 2022, the equities market has continued to witnessed a downward performance over the hike in inflation rate, among others that forced investors to fixed income market.

Reacting, analyst at PAC Holdings, Mr. Wole Adeyeye said: “Some investors migrated from equites market to fixed-income market in a move to take advantage of high yields, which was triggered by the recent hike in policy rate.

“Also, foreign investors avoided Nigerian stock market due to the upcoming general elections, weak local currency and insecurity in the country.”

He noted that the trend may likely continue in October as yield in the fixed-income market is expected to remain attractive.

“This trend may likely continue in September because rates in the fixed-income market is expected to remain relatively high. In addition, foreign investors may not patronise the Nigerian equities market at the moment due to the uncertainty surrounding the economy.

“Nevertheless, our medium-long term outlook for Nigerian equities market remains positive. This provides an opportunity for investors that want to take advantage of cheap stocks in the market at the momen,. he said.”

In addition, the CEO, Wyoming Capital & Partners, Mr. Tajudeen Olayinka commenting on the implication of 14 per cent MPR said: “Naturally and by default, a hike in MPR will immediately put pressure on investors to reprice financial instruments, whether it is equity instrument or fixed income instrument.

“In both instances, the direction of price movement would differ. Yields on fixed income instruments would rise, subject to system liquidity (demand and supply of instruments), while equity prices go down.

“This analogy suggests that CBN would do the ideal thing, by increasing supply of government securities, to be able to mop up perceived excess liquidity in the system.”

For equity market, he said: “The repricing of shares will hold very temporarily, as prices subsequently recover when yields stagnate in the fixed income market.

“This is also subject to capacities of listed companies to adjust to the variability of costs and cost pressures in the short run. This is the current behaviour in the Nigerian financial markets. It does not happen this way in more developed markets of Europe and America, because they operate a more synchronized monetary and fiscal policies.”