Business

February 12, 2024

Investors lose N1.4trn as high TB rates jolts stock market 

Investors lose N1.4trn as high TB rates jolts stock market 

By Peter Egwuatu 

Stock market investors lost N1.4 trillion on the Exchange last week following sell off in some shares triggered by increase in interest rates Treasury bills, TBs, by the Central Bank of Nigeria .

At the TB auction held last week, the CBN raised the stop rate for the 91-, 182-, and 364-day TBs to 17.24%, 18.00%, and 19.00%, respectively, from 5.00%, 7.50%, and 11.54% in the previous auction. 

This triggered sell off on some shares on the Nigerian Exchange Limited, NGX as investors moved to the fixed income market to take advantage of the attractive high yields on Treasury bills.

Consequently, stock market investors lost N1.4 trillion of their investment on the Exchange last week as market capitalisation, which represents the total value of investment, declined to N55.735 trillion on Friday from N57.158 trillion the previous week.

In the same vein, another stock market gauge, the NGX All Share Index, ASI declined by 2.5% to close at 101,858.37 points from 104,421.23 points in the previous week.

The market performance showed that over the course of the week under review, selloffs in BUA Cement led to the decline in its share by 10.00% Week on Week, W/W followed by Dangote Sugar 10.00% and UBA 9.11% to drive the market’s weak performance, thus outweighing gains in GEREGU, which went up 19.00% BUA Foods 3.82% and Transcorp Hotel 0.51%. 

Consequently, the Year-to-Date (YtD) return fell to 36.22%.

Analysts noted that the bearish sentiment witnessed at the NGX last week was as a result of the increased Treasury Bills’ TB rates, which weighed on the market with institutional investors and others selling off their shares to rebalance their portfolios for safety, ahead of this month’s Monetary Policy Committee, MPC meeting. Already, the Central Bank of Nigeria, CBN has signalled a return to orthodox monetary policy in its bid to attract foreign portfolio investments and boost US Dollar inflows to the country.

Reacting to market development, analysts at InvestData Consulting Limited said: “We have noticed the government dominating the fixed income market with high rates and yields while investors continue to digest and react to the latest TB rates hike. 

“We expect bear sentiment to continue as investors run for safety in fixed income instruments due to high yields in the face of dividend expectations and volatility ahead of January CPI and upcoming policy meeting, while pullback at this point will add more strength to upside potential. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.”