BREAKING: Stock market under pressure over macroeconomic outlook

There are indications that investors in the Nigerian stock market may have started trading cautiously amidst hazy macroeconomic outlook while awaiting the half year 2023 (H1’23) financial results of quoted companies.

Consequently, the market was dominated by the bears as investors took profits, selling off some positions to realign their portfolios.

The key index, Nigerian Exchange Limited (NGX) All-Share Index, ASI, closed lower on a mixed sentiment at 64,721.09 points, down 0.9% from 65,325.37 points the previous week.

In the same manner, the market capitalisation which reflects investors’ worth on the Exchange dropped by N150 billion to close at N35.422 trillion from N35.572 trillion the previous week.

Consequently, the Month-to-Date and Year-to-Date returns dipped to +0.6% and +26.3%, respectively.

On the other hand, activity levels were mixed, as the trading volume declined by 3.0% Week-on-Week, WoW, while the trading value increased by 17.2% Wow.

Across the sectors’ coverage, the Insurance Index down by 2.2%, Banking Index 2.1% and Oil and Gas Index 0.4% while the Consumer Goods went up by 2.4% and Industrial Goods Index 0.4%.

Analysts have emphasized that market players continued to digest macroeconomic indices that are putting pressures on financial market instruments.

The recent inflation data, according to them, has revealed the worsening negative returns in the fixed income space.

These are to further guide the ongoing portfolio repositioning ahead of first-tier banks’ half-year earnings reports which the analysts expect would be positive, given that operators in that sector are net beneficiaries of foreign exchange revaluation gains, aside from the corporate actions of PZ, Flour Mills and Honeywell Flour for the financial year ended May and March 2023 respectively.

Reacting on market performance and outlook, analysts at Cordros Research said: “We expect market performance to stay mixed in the week ahead as investors rebalance their portfolios following an assessment of corporate earnings released thus far for H1-23. In the medium term, we expect investors’ sentiments to be influenced by developments in the macroeconomic landscape and the movement of yields in the fixed-income market. Overall, we reiterate the need for positioning in only fundamentally sound stocks as the weak macro environment remains a significant headwind for corporate earnings.”

Similarly, analysts at Invest Data Consulting stated: “We expect recovery as mixed sentiments continue on bargain hunting and others like market players digesting macroeconomic retreats assigning of portfolios to the ministers and the $3 billion cash loan to help intervention in Nigeria’s FX market in the midst of expected first tier banks earnings reports and bargain hunting, while portfolio realignment and sector rotation persists.”