Domestic equities: Investors take guarded stance on equities over uncertainties from CBN’s special bills

By Charles Abuede

The equities market bucked its two-week bullish trend, pressured by worries concerning the Central Bank of Nigeria’s plan to return bank’s excess cash reserve ratio (CRR) by means of the Special Bills announced recently.

Market participants, therefore, took a guarded stance to assess the potential impact on equities vis-à-vis the fixed income space, as the apex bank issued N4.1 trillion of the 81-day Special Bills at 0.5 per cent on Thursday, last week.

Against this backdrop, the market recorded its longest losing streak (5 days) since June 25, 2020 (6 days). Notwithstanding, analysts see the downtrend providing attractive entry points into fundamentally sound tickers. Meanwhile, investors expect that this week, the market will remain fragile on weak sentiment that may linger.

Consequently, last week, the domestic equities market performed negatively as investors took profit in Dangote Cement (-10.7%), WAPCO (-10.7%) and Zenith Bank (-3.6%). As a result, the NSE All-Share Index closed in the red, shedding 2.5 per cent week on week to settle at 34,250.74 points. Similarly, the market year to date return moderated to 27.6 per cent while market capitalisation fell by N463.7 billion from the previous week to N17.9 trillion.

Market activity level was mixed as average volume traded rose 35.2 per cent to 453 million units while value traded fell 17.4 per cent to N4.2 billion. The top traded stocks by volume were United Bank for Africa (275.2 million units), FBN Holdings (146.1 million units) and Zenith Bank (143.4 million units) while Guaranty Trust Bank (N4.5 billion), Zenith Bank (N3.3 billion) and UBA (N2.3 billion) led by value.

Similarly, the performance across sectors was bearish as all indices trended southward during the week. Thus, the industrial goods and banking indices declined 5 per cent and 2.9 per cent respectively on the back of sell pressures in WAPCO (-10.7%), Dangote Cement (-8.0%), Access Bank (-5.8%) and Zenith Bank (-5.2%).

Trailing, the insurance and AFR-ICT indices lost, shedding 1.8 per cent apiece due to price depreciation in Regal Insurance (-16.7%), AIICO Insurance (-4.5%), CHAMS PLC (-4.5%) and MTN (-0.8%). Similarly, the consumer goods and oil & gas indices fell 1.6 per cent and 0.3 per cent respectively on account of sell-offs in Champion (-8.2%), Flour Mills (-6.8%) and ARDOVA (-6.8%).

Investor sentiment as measured by market breadth (advance/decline ratio) weakened to 0.3x from 0.4x as 14 stocks advanced against the 43 that declined. The top-performing stocks for the week were FTN Cocoa (+51.7%), UNION DAC (+16.0%) and Okomu Oil (+10.0%) while Regal Insurance (-16.7%), UPL (-14.3%) and NEIMETH (-12.4%) were the laggards.