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Investors lose N1.4 trillion in Q3

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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Moses Igbrude, the secretary of publicity for the Independence Shareholders Association, also remarked that the decreasing trend in the stock market is partially attributable to the growing insecurity in the country.

He said: “Investors prefer where their funds and investments are safe. Other social and economic challenges are affecting the market. The Federal Government should address these issues to reverse this ugly trend.”

An analyst at PAC Holdings, Wole Adeyeye, said: “Investors may be looking at the risk-free securities in the fixed-income market as we expect yields to increase. Investors may likely sell part of their equity investments to buy treasury bills and bonds.

“Consequently, bears may dominate the equities market in the fourth quarter of 2022. Nevertheless, this creates an opportunity for investors that want to take advantage of cheap stocks in the market.”

Ambrose Omordion, chief operating officer of InvestData Consulting Limited, stated that the market was turbulent in Q3 due to a combination of bargain seeking and profit taking.

According to him, the rate hike adjustment has created another round of sector rotation and selling pressure in the market, as a result of aggressive hawkish monetary policy around the world, which has prompted some nations to return to intervention tactics to prevent the economic collapse.

Omordion noted that the nation’s high debt profile would not survive this rising rate, despite the fact that the World Bank and IMF have cautioned central banks to rethink their policies and prevent triggering a worldwide recession.

“We see that is already happening in the UK, China, Japan and others. It is time for the Nigerian central bank and its Monetary Policy Committee to have a rethink before things go out of hand.”

He stressed the need for a stronger and more vibrant economy that would reflect on the capital market so that the 2022 financial year would end on a positive trajectory.

“We need to finish the year strong. The low valuation of NGX, high earnings and dividend yields on improved earnings released so far in the year, coupled with the expectation of third-quarter corporate earnings are expected to shape the market direction.

“However, with inflation hitting 17 years high above 20 per cent, many players stay on the fence, waiting to confirm direction before jumping in, as the outlook for the economy and the financial market remains unpredictable,” he said.

However, he added that there are stocks investors should pay attention to, as the correction in the NGX index action creates buying opportunities in some sectors and stocks with high dividends, high yield and positive earnings growth.

“Despite the lingering high-interest rates atmosphere, rising inflation and slowing industrial output as a result of policy changes and uncertainty around the globe, there are sectors, industries and individual stocks that are still seeing positive activities from traders and investors.

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Emediong Ekpe

Emediong Ekpe is a graduate of English. A professional Sports journalist/analyst, and a spoken word artist. He is passionate about decimating information and putting smiles on people's faces via news writing.

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