‘MPC meeting outcome to determine trading sentiments on NGX this week’

Economists forecast lending rate hike ahead of MPC meeting

With the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) expected to hold its third meeting of the year today and tomorrow, market operators have said that the outcome of the meeting will determine the trading mood of investors on the floor of the Nigerian Exchange Limited (NGX).

The domestic bourse had seen profit-taking by investors in most of its trading sessions last week resulting in the market’s All-Share Index (ASI) falling by 0.22 per cent to close at 52,979.96 points while market capitalization decreased by N64 billion closed at N28.562 trillion. Similarly, all other indices finished lower with the exception of NGX-Main Board, NGX Insurance, NGX MERI Growth and NGX Oil/Gas indices which appreciated at 1.60 per cent, 3.63 per cent, 0.14 per cent and 0.30 per cent while the NGX Asem index and NGX Sovereign bond closed flat.

However, activity levels were upbeat as trading volume of stocks and value increased by 66.4 per cent and 16.9 per cent, respectively. Specifically, a total turnover of 3.021 billion shares worth N31.784 billion in 29,153 deals was traded, in contrast to a total of 1.816 billion shares valued at N27.194 billion that exchanged hands previously in 36,286 deals.

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The financial services industry (measured by volume) led the activity chart with 2.244 billion shares valued at N12.399 billion traded in 10,817 deals; thus contributing 74.30 per cent and 39.01 per cent to the total equity turnover volume and value respectively. T

The conglomerates industry followed with 345.806 million shares worth N558.873 million in 1,676 deals while the consumer goods industry recorded a turnover of 149.009 million shares worth N2.750 billion in 5,632 deals.

Trading in the top three equities namely FCMB Group Plc, Jaiz Bank Plc and Transnational Corporation Plc (measured by volume) accounted for 1.698 billion shares worth N4.095 billion in 2,188 deals, contributing 56.21 per cent and 12.88 per cent to the total equity turnover volume and value respectively.

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Reacting to the performance of the market, analysts who spoke to Daily Sun via email, noted that the performance does not come as a surprise as the market reflects the mood of the economy which is currently under uncertainty ahead of the 2023 elections.

They also posited that cautious trading would be the theme of the market as investors would be focused on the outcome of the MPC meeting to gain further clarity on the movement of yields in the fixed income market.

According to Abdulazeez Kuranga, a Research Analyst covering SSA macro-economy, fixed income markets at Cordros Capital, the market might react to the outcome of the meeting, given the aggressive chorus among global central banks and the unabating domestic inflationary pressures amid the lingering Russia-Ukraine conflict.

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“We suspect the Committee would retain the MPR at 11.5 per cent alongside other monetary policy parameters, given the CBN’s preference for its unorthodox policies. Besides, we think considerations about the implications of a rate hike on the domestic interest rate environment may prompt the majority of Committee members to push back a rate hike until the next policy meeting in July.

“However, we do not rule out the possibility of a 50 basis points hike in the MPR given the hawkish rendition among global central banks and the indirect impact of the Russia/Ukraine crisis on domestic inflationary pressures. Hence, we believe that there will be cautious buying actions from investors interested in cyclical stocks with attractive dividend yields. Notwithstanding, we reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings”, he said.


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