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Tuesday, January 31, 2023

Rising inflation, geo-political tensions put pressure on stock market as investors lose over N159bn at NGX

Sustained sharp rise in inflation rate, geopolitical tension and slowing consumer spending have been blamed for the bearish mood on the Nigerian Exchange Limited, NGX, which continued last week.

According to a report by Vanguard, the selling pressure on the Exchange and profit taking hit more blue chip stocks with the investors losing over N159 billion last week while the benchmark NGX All-Share index closed lower at 49,370.62 points down from 49,664.07 points the penultimate week.

The market capitalisation which represents total monetary value of all investments in the market closed at N26.628 trillion from N26.787 trillion the penultimate week.

Analysts observed that the local bourse was not immune to the rout in global equities, as bearish sentiments persisted for the second consecutive week.

Particularly, selloffs in bellwether stocks such as Okomu Oil which declined by 10.0%, Presco 10.0%, and WAPCO 10.0%, drove the weekly loss. Consequently, the Month-to-Date, MtD, loss increased to -2.0%, while the Year-to-Date, YtD, gain moderated to 15.6%.

Likewise, activity levels mirrored the overall market broad gauge, as trading volume and value declined by 45.5% Week-on-Week, WoW and 9.7% WoW, respectively.

Reacting to the market development, analysts at Cordros Research stated: “We expect market performance to remain mixed in the coming week as investors rotate their portfolios towards stocks with attractive dividend yields, which could be matched by intermittent profit-taking activities. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.”

In their own response, analysts at InvestData Consulting said: “The seeming lull in the market that has been revealed by the volume patterns in recent weeks in the face of better than expected corporate earnings resulted from low liquidity in the market and the economy due to rate hike. Nevertheless, the current state of the market provides huge opportunities for position traders, as smart money is likely to hit the market any moment from now, amid ongoing interpretation of the recently released Consumer Price Index and corporate earnings by institutional investors and others are ongoing.

“While we note the effects of the increasing global volatility as a result of rising rates, inflation, geopolitical tension and slowing consumer spending, there are however, pockets of strength in some sectors amidst impressive earnings releases that offer insights into strong group stocks with value in the industries and companies in the various sectors.”

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