Equity market sustains bullish trend amidst CBN-MPC rate hike

The equity market rose 0.11 percent on Tuesday, amidst the Central Bank of Nigeria’s Monetary Policy Committee raising the policy rate to 26.25 percent.

Notably, investors’ sustained buy interest in banking and consumer goods sectors maintained the market’s upward trajectory.

Supreme News reports that CBN-MPC on Tuesday increased the benchmark interest rate by 150 basis points to 26.25 percent from 24.75 percent set in March.

Mr. Yemi Cardoso, CBN Governor,stated this at the news conference following the 295th MPC meeting of the regulator.

Cardoso said the apex bank retained the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45 percent and put the asymmetric corridor around the MPR at +100 and -300 basis points.

The CBN further set the liquidity ratio of banks at 30 percent.

The CBN Governor attributed the third consecutive hike in bank interest rates in 2024 to continued efforts towards moderating inflation, which reached 33.69% in April 2024, according to the National Bureau of Statistics (NBS).

Reacting, a stock broker, Mr. Victor Ibrahim, said that investors did not react to the CBN-MPC decision because the hike in the monetary policy rate is targeted at tightening inflationary pressure as a result of an increase in the price of goods.

Ibrahim said in an interview in Lagos that the equity market does not have a direct correlation with the prices of goods; hence, the hike in the policy rate did not affect its performance.

He explained that though the decision of the CBN-MPC to control inflation was laudable, the apex bank needed to take a decision that addressed both the monetary and fiscal policies to yield desirable results and curb the current inflation in the country.

According to him, investors did not also react negatively to the CBN-MPC decision because the stock market is just overcoming sentiments from the CBN directive on the bank’s recapitalization exercise.

The stock broker noted that the equity market is recently undergoing a market reversal and share price correction, especially for the shares of banking stocks, which have been greatly affected for some time.

“Investors are taking advantage of the reasonable price offer of stocks on the floor of the exchange, especially the banking stocks, ahead of the bank’s recapitalization deadline to acquire more wealth,” he said.

Meanwhile, the Nigerian Exchange Ltd. (NGX) market capitalization gained N61 billion, or 0.11 percent, to close at N55.597 trillion, as against N55.536 trillion recorded on Monday.

The All-Share Index, which opened at 98,176.58, also advanced by 0.11 percent, or 109 points, to close at 98,285.33.

Consequently, the year-to-date (YTD) return rose to 31.44 percent.

Market breadth closed flat, with 20 gainers and 20 losers traded on the floor of the exchange.

On the gainers table, Berger Paints led by 9.96 percent to close at N14.90, and Nestle trailed by 9.76 percent to close at N900 per share.

Sovereign Trust Insurance gained 8.11 percent to close at 40k, Royal Exchange added 7.14 percent to close at 60k, and Tantalizers rose by 6.38 percent to close at 50k per share.

On the other side, International Energy Insurance led the losers’ table by 9.70 percent to close at N1.49, while Deap Capital Management and Trust Plc followed by 8.33 percent to close at 44k per share.

UPDC Real Estate Investment Trust also lost 7.69 percent to close at N1.20, WAPIC declined by 7.25 percent to close at 64k, and Sterling Nigeria shed 6.25 percent to close at N4.20 per share.

Analysis of the market activities showed trade turnover settled lower relative to the previous session, with the value of transactions declining by 23.02 percent.

A total of 222.90 million shares valued at N5.15 billion were exchanged in 7,228 deals, in contrast to 405.66 million shares valued at N6.69 billion being exchanged in 8,439 deals posted in the previous session.

Meanwhile, GTCO led the activity chart in volume and value with 40.64 million shares worth N1.62 billion, followed by Access Corporation with 27.52 million shares valued at N469.13 million.

The United Bank for Africa (UBA) sold 23.96 million shares valued at N502.44 million, and Transnational Corporation traded 22.83 million shares valued at N260.68 million.

Also, Jaiz Bank transacted 11.55 million shares worth N24.30 million.