High yield in fixed income instruments halts Bull Run at equities market
Aturnover of 2.4 billion shares worth N47.9 billion was recorded in 54,982 deals by investors on the floor of the exchange last week. The volume was lower than 3.893 billion units valued at N95.1 billion that exchanged hands in 69,117 deals the previous week.
Similarly, sell pressures in BUA cement (- 10 per cent) and MTNN (- 5.2 per cent) depressed the All- Share Index and market capitalisation by 2.4 per cent to close the week at 101,858.37 and N55.735 trillion respectively, bringing the MTD and YTD returns to + 0.7 per cent and + 36.2 per cent, respectively, while all other indices finished lower except NGX ASEM, which appreciated by 4.63 per cent.
Operators attributed the downturn to treasury bill auction by the CBN.
Specifically, Head Equity, Planet Capital, Paul Uzum, said: "The stop rate on one year T- bill spiked to 19 per cent with an implied annual yield of 23 per cent. So, if investors could earn as high as 23 per cent in fixed income, many would be selling Equity to switch to Treasury bills.
"The market reacted to the news that Thursday will sell off across the market. However, stability returned in today's trading session."
Analysts at Cordros Securities said: "We expect the weak sentiments that dominated the local bourse this week to persist in the week ahead as investors continue to scale down exposure to equities amidst expectations of a continued uptick in fixed income yields.”
Chief Research Officer of Investdata Consulting Limited, Ambrose Omordion said: "The trading volume pattern suggests hold and watch disposition of market players, as traders reduce position in some sectors in the face of others investment windows returns remain below inflation and negative. "We expect bear sentiment to continue as investors run for safety in fixed income instruments due to high yields in the face of dividend expectations and volatility ahead of January CPI and upcoming policy meeting, while pullback at this point will add more strength to upside potential.
"Therefore, market players should target companies with consistent track records of dividend payment, strong fundamentals and growth prospects that will support further growth in earnings."
Analysts at Cordros Securities said: "We expect the weak sentiments that dominated the local bourse this week to persist in the week ahead as investors continue to scale down exposure to equities amidst expectations of a continued uptick in fixed income yields.”
Vetiva Dealings and Brokerage said: "The market recorded its first negative weekly close as sentiment remains bearish amid rising rates in short- term fixedincome instruments. We expect a mixed trading session next week, as investors trade cautiously in the market."
The financial services industry ( measured by volume) led the activity chart with 1.7 billion shares valued at N28.5 billion traded in 25,751 deals; thus contributing 68.1 per cent to the total equity turnover volume and value respectively.
The conglomerate's industry followed with 210.3 million units worth N2.9 billion in 4,419 deals. The third place was the oil and gas industry, with a turnover of 203.8 million shares worth N2.1 billion in 4,544 deals. Trading in the top three equities namely FBN Holdings Plc, Transnational Corporation Plc and Jaiz Bank Plc ( measured by volume) accounted for 732.8 million shares worth N13.7 billion in 7,040 deals, contributing 29.6 per cent to the total equity turnover.