Investors keep shunning equities on rising Fixed Income market yields

Investors keep shunning equities on rising Fixed Income market yields
  • Trade volume slides by 42.6%; value contracts 22.9%
  • Investors lose N130bn
  • Experts expects dividend news to temper sell-offs


For the third week in a row, trading on the floor of Nigerian Stock Exchange (NSE) ended in red as investors picked new bride in the Fixed Income market following rising yields.

Despite the modest positive start recorded in the market at the beginning of last trading week, the bears waxed stronger and impaired the aggregate value of equity assets at the market by N130 billion loss, dragging the market Cap lower to N21.026 trillion.

Similarly, the benchmark index that tracks share prices at the market slid by 0.63 per cent as it shed 253.15 point to close the week at 40,186.70 basis points.

While analysts could not disregard profit-making pressure on the current outlook of the market, investment experts attributed the downtrend largely to upward retracement in yields in the Fixed Income (FI) market, which has continued to dampen appetite for equities.

For instance, the bond auction results, wherein stop rates rose by an average of 254 basis points (bps) to 11.10 per cent from 8.56 per cent at the last auction, further magnified the downbeat mood during the week.

Consequently, the year-to-date (YtD) return on stocks swung into negative territory, settling at -0.2 per cent amidst weak activity levels, as volume and value traded declined by 42.6 per cent and 22.9 per cent week-on-week, respectively.

Notably, sell-offs in STANBIC (-14.0 per cent), BUACEMENT (-1.8 per cent) and MTNN (-1.1 per cent) drove the weekly loss.

Also, the sectoral performance was broadly negative. Save for the Oil and Gas index that appreciated by +4.6 per cent) and Banking index that trailed the green lane with +0.5 per cent gain, the Insurance, consumer goods and industrial goods indices fell by -1.7  per cent, -1.0 per cent and -0.7 per cent respectively.

Reacting To the weekly market trend, analysts at Cordros Capital Limited envisaged the deluge of corporate earnings accompanied by dividend declarations to temper bearish sentiments in the week ahead.

However, they said they did not rule out the possibility of continued profit-taking activities due to growing concerns about yield elevation in the FI market.

“As a result, we think the local bourse will likely exhibit a zig-zag pattern. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings,” they maintained.

In an interview with Business Metrics, Ambrose Omordion, the chief research of officer (CRO) of Investdata Consulting Limited, had maintained that since low yields in the FI market pumped funds into the equities market in 2020, the market would bleed any time it sees a reversal of the policy.

Weekly Trading Figures

At the close of trading last week, a total turnover of 1.541 billion shares worth N18.235 billion in 22,752 deals were traded in contrast to 2.683 billion shares valued at N23.662 billion that exchanged hands the previous week in 27,844 deals.

The Financial Services Industry (measured by volume) led the activity chart with 1.099 billion shares valued at N11.110 billion traded in 12,544 deals; thus contributing 71.35 per cent and 60.92 per cent to the total equity turnover volume and value respectively.

The Consumer Goods Industry followed with 133.156 million shares worth N2.327 billion in 3,941 deals, while the third place was conglomerates industry, with a turnover of 121.143 million shares worth N263.219 million in 839 deals.

Meanwhile, trading in the top three equities namely First Bank Holding Plc, Guaranty Trust Bank Plc and Zenith Bank Plc (measured by volume) accounted for 553.512 million shares worth N8.931 billion in 5,132 deals.

A total of 1.054 million units of Exchange Traded Products (ETPs) valued at N7.902 billion were traded this week in 49 deals compared with a total of 1.394 million units valued at N5.163 billion transacted last week in 36 deals.

Similarly, investors traded a total of 8,613 units of bonds valued at N12.566 million in two deals compared with a total of 46,721 units valued at N60.054 million transacted previously in 19 deals.