In the third quarter, investors lost N1.484 trillion in the equity sector of the capital market as a result of rising interest rates, insecurity, and other domestic economic issues, as well as global economic uncertainty (Q3).
The all share index (ASI), which measures the performance of listed stocks, decreased by 5.39 percent to conclude the quarter at 49,024.16 basis points (bps) compared to 51,817.59 bps when trading began on July 1, 2022.Infomation Guide Nigeria
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Similarly, market capitalisation, or the total market value of outstanding shares of listed businesses, decreased by N1.484 trillion to close at N26.451 trillion compared to its starting value of N27.935 trillion.
Throughout the period, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) decided twice to increase the Monetary Policy Rate (MPR) from 13% to 15.5%. The MPR was previously increased by 150 bps in May.
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In addition, the Committee voted last month to boost the minimum Cash Reserve Requirement (CRR) to 32.5%.
Speaking on the stock market performance, Vice president, Highcap Securities, David Adonri said: “Whenever CBN hikes interest rate to tighten monetary policy, the primary objective is to use it as a short-term tool to bring down inflation. However, it can also affect trade-offs in the capital market by shifting the balance between equities and debt.Jamb Result
“In this case, it causes financial assets to migrate more to debts due to an increase in yields precipitated by the interest rate hike. Consequently, the price is likely to fall temporarily in equities until the policy runs its course.
“Monetary policy is a short-term tool to battle a structural economic instability to give room for appropriate fiscal policies implemented to address the cause of the imbalance. Therefore, the tightened monetary policy and attendant weakened demand make equities a buyer’s market now.”
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