Investors dump equities for high-interest debts

Investors reacted sharply on Wednesday to the increase in benchmark interest rate by the Central Bank of Nigeria, dumping quoted shares to buy fixed-income securities. The Monetary Policy Committee (MPC) of the apex bank had on Tuesdayincreased the Monetary Policy rate (MPR) from 11 per cent to 12 per cent.

Key indices at the Nigerian Stock Exchange (NSE) closed in the negative on Wednesday, the first trading session after the interest rate hike. With 32 losers to nine gainers, the market situation was overwhelmed by widespread selling sentiments as investors sought to adjust their portfolios in favour of debt securities which now carry higher rates.

Aggregate market capitalization of all quoted equities on the NSE dropped from N8.951 trillion to close at N8.853 trillion, representing a loss of N98 billion. The All Share Index (ASI), the value-based index that tracks prices of all quoted equities, declined by 1.09 per cent from its opening index of 26,020.32 points to close at 25,736.92 points. This nudged the negative average year-to-date return back to double-digit at -10.14 per cent.

Sectoral indices underscored the widespread losses. The NSE Industrial Goods Index declined by 2.0 per cent. The NSE Banking Index dropped by 1.5 per cent. The NSE Insurance Index lost 1.2 per cent while the NSE Oil & Gas Index depreciated by 0.8 per cent. However, the NSE Consumer Goods Index rose by 1.0 per cent.

The widespread losses were also orchestrated by losses recorded by several highly capitalised stocks including FBN Holdings, United Bank for Africa (UBA), Guinness Nigeria, Dangote Cement and Lafarge Africa among others.

Petroleum stocks led the losers with Mobil Oil Nigeria dropping by N7.54 to close at N154.91. Total Nigeria followed with a loss of N7.49 to close at N142.46. Dangote Cement dropped by N4 to close at N164. Guinness Nigeria declined by N3.07 to close at N108.93. Seplat Petroleum Development Company lost N2 to close at N308 while Cadbury Nigeria dropped by N1.67 to close at N15.53 per share.

Total turnover stood at 398.27 million shares valued at N2.65 billion in 3,581 deals. The three most active stocks were United Capital, with 95.96 million shares;  Access Bank, 60.74 million and Multi-Trex Integrated, which recorded a turnover of 40 million shares.

On the positive side, Nigerian Breweries led the contrarian stock with a gain of N4.41 to close at N113.61. Vitafoam Nigeria rose by 20 kobo to close at N4.30 while Nigerian Aviation Handling Company added 19 kobo to close at N3.99 per share.

Analysts attributed the decline to the interest rate hike by the apex bank. “The Nigerian equities market returned to the red today, which did not come as a surprise as investors were bound to take profit after four consecutive days of gain amid weak macro-economic conditions and uninspiring deliberations from the recently concluded MPC meeting,” Afrinvest Securities stated.

 

 

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