The Nigerian equities market ended its first trading week of 2023 on a disappointing note, with investors recording a collective loss of N26 billion, as reported by Nkiruka Nnorom on January 9, 2023. This downturn defied earlier predictions from analysts who anticipated a continuation of the bullish momentum that carried the market into the new year. The unexpected shift highlights the volatility of the financial landscape as the year begins.
A Shift from Bullish Expectations
Analysts had forecasted a sustained positive trend, expecting that the release of 2022 full-year corporate financial results would drive buying activity, despite pre-election uncertainties. However, the market experienced significant sell-offs in key heavyweight stocks, pulling it into negative territory. Despite closing in the green for three of the four trading sessions, the overall performance reflected a cautious investor sentiment.
The benchmark All Share Index (ASI) dropped to 51,222.34 points from an opening value of 51,251.06 points, marking a modest decline of 0.06 percent. Similarly, the market capitalization of listed equities fell by N26 billion, or 0.09 percent, settling at N27.899 trillion from N27.915 trillion at the week’s start. This dip underscores the impact of profit-taking activities on market stability.
Key Drivers of the Decline
The sell-offs were notably influenced by sharp declines in shares of Airtel Africa Plc (-5.2%) and BUA Cement Plc (-1.8%), which weighed heavily on the market. However, bargain-hunting in BUA Foods Plc (+14.6%) and Nigerian Breweries Plc (+14.6%) provided some counterbalance, though it was insufficient to offset the overall losses. As a result, the Year-to-Date (YTD) return closed at a negative 0.1 percent, signaling an early challenge for investors.
Activity levels also shifted, with the total volume traded decreasing by 51 percent to 921.856 million units from 1.880 billion units the previous week. Conversely, the total value traded rose by 43 percent to N27.154 billion from N18.988 billion, indicating a higher value per transaction despite lower volume. This mixed data reflects a market adjusting to new dynamics.
Sectoral Performance and Outlook
Sectoral analysis revealed a varied performance, with the industrial goods sector experiencing a 0.6 percent decline. In contrast, other sectors showed resilience, with consumer goods gaining 6.4 percent, banking up by 4.3 percent, insurance rising 2.7 percent, and oil and gas increasing by 0.1 percent. This divergence suggests that while some industries thrived, broader market pressures dominated the week’s outcome.
Looking ahead, analysts at Cordros Capital remain cautiously optimistic. They noted, “We believe positioning for 2022 full year earnings releases and accompanying dividends declarations will continue to support buying activities on the local bourse even as institutional investors continue to search for clues on the direction of yields in the fixed income market.” This projection hints at potential recovery if corporate earnings meet expectations.
Implications for the Market
The N26 billion loss serves as a reminder of the market’s sensitivity to profit-taking and external economic factors. The sell-offs in heavyweight stocks like Airtel Africa and BUA Cement indicate a strategic retreat by investors, possibly influenced by pre-election jitters or profit realization after a strong year-end. As the market navigates these challenges, the focus will be on how institutional investors respond and whether the anticipated earnings releases can restore confidence.
For now, the equities market faces a period of adjustment, with the coming weeks critical for gauging its trajectory. Investors will be watching closely as the interplay of sectoral gains and broader losses shapes the year’s early financial narrative.
