…As CBN survey shows high-interest rate, others restrained business activity
In October first trading week, Investors’ lost N140 billion in the equities market segment of the Nigerian Stock Exchange (NSE) over sell-off in large-mid capitalised companies.
This is just as the Central Bank of Nigeria (CBN) monthly Business Expectations Survey Report for September revealed that insufficient power supply, high-interest rate, and unfavourable economic climate, among others factors constrained business activity for September.
The Daily Times checks showed that market capitalisation of listed equities market opened trading in October at N11.962 trillion, 1.17 per cent drop to N 11.822 trillion on last week Friday.
Consequently, the NSE All-Share Index depreciated by 1.17 per cent or 383.22 basis points to close last week at 32,383.15 basis points from 32,766.37 basis points the equities market opened for trading in October.
The sell-off dragged NSE All-Share Index to 15.32 per cent.
According to the NSE weekly report, a total turnover of 924.546 million shares worth N14.194 billion in 14,119 deals was traded last week by investors on the floor of the Exchange.
The report noted that “financial services industry (measured by volume) led the activity chart with 745.188 million shares valued at N9.477 billion traded in 8,329 deals; thus contributing 80.60per cent and 66.77 per cent to the total equity turnover volume and value respectively.
“The Consumer Goods Industry followed with 67.159 million shares worth N3.815 billion in 2,221 deals. The third place was Conglomerates Industry with a turnover of 49.297 million shares worth N135.395 million in 678 deals.
“Trading in the Top Three Equities namely – Guaranty Trust Bank Plc, United Bank for Africa Plc and Fidelity Bank Plc (measured by volume) accounted for 368.044 million shares worth N6.485 billion in 2,585 deals, contributing 39.81per cent and 45.69per cent to the total equity turnover volume and value respectively.”
The weekly report disclosed that a total of 49,238 units of Exchange Traded Products (ETPs) valued at N807.376.95 was executed in five deals.
On bond, the report stated that “A total of 2,155 units of Federal Government Bonds valued at N2.113 million were traded this week in 12 deals compared with a total of 13,715 units valued at N13.242 million transacted last week in 49 deals.”
Analysts at InvestmentOne Research, in a report, said: “In our opinion, we believe the equity market is still weak due to factors such as the increasing U.S treasury yields.
“In anticipation of more rate hikes by the U.S Fed as well as investors’ skepticism around the country’s 2019 election.
“However, the recent sell-off, which has restored attractive upsides on our top picks, presenting a decent entry opportunity for investors with a medium to long-term horizon.”
The report that was released at the weekend said the majority of the respondent firms expect the naira to appreciate in the current and next months’ as the confidence indices stood at 29.9 and 41.5 points, respectively.
Meanwhile, the apex bank has stated that the surveyed firms identified insufficient power supply (65.9 points), high interest rate (54.9 points), unfavourable economic climate (53.6 points), financial problems (51.6 points), unclear economic laws (47.1 points),
unfavourable political climate (46.9 points), insufficient demand (44.5 points) and access to credit (40.4 points) as the primary factors constraining business activity in the current month.”
Respondent firms to CBN survey said they expected the inflation rate to fall in both the current and next months, with confidence indices of -4.7 and -13.9 points for the current and next months, respectively.
“Similarly, respondent firms expect borrowing rates to rise in both current month and next month as the confidence indices stood at 3.7 and 1.8 points, respectively.”
On business outlook, respondents’ outlook improved as against the prior month report by CBN.
The survey stated: “At 24.8 index points, respondents’ overall confidence index (CI) on the macroeconomy in September 2018 was more optimistic when compared with the level of 21.5 index points recorded in August 2018.
“The businesses outlook for October 2018 showed more confidence on the macroeconomy at 64.5 index points.
“The optimism on the macroeconomy in the current month was driven by the opinion of respondents from services (16.2 points), industrial (6.0 points), wholesale/retail trade (1.9 points) and construction sectors (0.6 points),
whereas the drivers of the optimism for next month were services (38.3 points), industrial (18.8 points), wholesale/retail trade (4.9 points) and construction (2.5 points) sectors.
“Businesses that are neither import drove the positive outlook by type of business in September 2018- nor export-oriented (17.8 points), both import- and export-oriented (3.6 points) import-oriented (2.8 points), and those that are export-related (0.6 points).”
Businesses owners had expressed optimism on own operations in September 2018 when compared to the previous month.
“Respondents from services and industrial sectors expressed relatively more optimism on own operations in the current month with indices of 9.6 and 2.1 points, respectively when compared with 8.1 and -1.1 points reported in August 2018, respectively,” the survey by CBN explained.