Analysts Predict Profit-taking Amid N1.99tn WoW Market Cap Decline

Capital market analysts have predicted that investors’ profittaking will continue to rock the stock market of the Nigerian Exchange Limited (NGX) this week as stock investors seek policy direction from the Central Bank of Nigeria (CBN) to trigger the positive sentiment.

It was another profit-taking outing last week for the stock market on the back of weak sentiment which was spurred by higher yields outlook in the fixed-income market as portfolio rebalancing continues ahead of expected 2023 corporate earnings and outcome of the Monetary Policy Committee (MPC) of CBN.

Specifically, the NGX All-Share Index declined by 3.44 per cent week-on-week (W-o-W) to close at 102,088.30 basis points, while the overall market capitalisation lost N1.99 trillion to close the week at N55.861 trillion.

The MPC is scheduled to convene on February 26th and 27th, marking its inaugural meeting for the year and the first for the current CBN governor, following two postponements in the latter half of 2023. This will also be the first session of the newly constituted committee since the change of guard at the CBN.

A group of analysts at Cowry Asset Management Limited said, “we anticipate the bearish sentiment to continue as the market seek catalyst and policy direction from economic managers to trigger the positive sentiment.

“However, as we anticipate more corporate releases for the final quarter of 2023, investors will begin to rebalance their portfolio in their search for alpha amidst the rising fixed income yields and outcome of the monetary policy meeting. Meanwhile, we continue to advise investors on taking positions in stocks with sound fundamentals.”

Afrinvest Limited said: “in the new week, we expect bargainhunting opportunities to boost market performance.”

Analysts at Cordros Research stated that it expected limited bargain-hunting activity in the near term due to prevailing negative sentiments driven by movements in fixed-income market yields and uninspiring earnings releases.

They anticipated a decisively hawkish stance from the MPC regarding interest rates, aligning with the CBN’s commitment to achieving price stability.

“Our projection is for a significant increase in the monetary policy rate by 150basis points while leaving other parameters constant. The anticipated increase in the policy rate would be in contrast to the prevailing global trend, where many central banks are scaling back on rate hikes and contemplating reductions.