Fear of increase in Interest Rate by CBN Moderates Trading on NSE

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Fear of increase in Interest Rate by CBN Moderates Trading on NSE
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Anticipation of an increase in Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN) moderated equities trading on The Nigerian Stock Exchange (NSE) last week as share dumping by nervous investors depreciated the  market by N81.5 Billion.

But market watchers described the bearish trend as an opportunity for discerning investors to mop up shares of blue chip companies with strong fundamentals.

Analysts at APT Securities ascribed the market downswing to the result of positive close of 2020 which elicited profit taking by investors and fear of increase in MPR which currently stands at 11.5 percent.

An increase in MPR, a nominal anchor, will encourage speculators to move their money to the money market to earn higher yield as there is an inverse relationship between the capital market and money market.

Meanwhile, there are speculations that the apex bank may increase the MPR to attract depositors following the rising inflation rate which is currently at 15. 75 percent.

At the end of Friday’s trading, the market depreciated by 0.24 percent to close at 41,001.99 basis points as against 0.12 percent depreciation recorded previously.

The All Share Index dropped by 0.42 percent to close the week on the negative while the market capitalisation came down to N21.448 trillion as against the week’s high N21.530 trillion.

The NSE sectoral indices closed the week in red, led by the banking sector which recorded the highest decline by 1.33 percent, followed by insurance which dipped by 0.80 percent, and the industrial sector with 0.51percent losses.

Others are oil and gas index with 0.13 percent depreciation and consumer goods dipped 0.09 percent.

Friday’s market breadth closed negative as NCR led 21 gainers at the end of the day’s trading, while Cornerstone Insurance Plc led 31 others in the losers’ chart.

Market turnover also closed negative as volume moved down by 47.26 percent compared to 72.61 percent uptick recorded in the previous session. Transcorp, Japauloil and UBA were the most active for Friday trading.

Analysts said that the fear was heightened by the latest FGN Bonds which reopened on adjusted and juicier rates for long tenored bonds.

“The relative stability in the market was due to dominance of domestic institutional investors”, the analyst said.

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