Investors lose N1.48trn in Q3 amid rising insecurity, onterest rate hike

The nation’s equity market has recorded low performance at the end of third quarter this year as investors lose N1.484 trillion within the period.


The NSE All Share Index (ASI), which measures the performance of listed equities shed 5.39 per cent to close the third quarter on September 30, 2022 at 49,024.16 points from 51,817.59 points at which it opened trading on July 1, 2022.
Similarly, market capitalisation, the total market value of listed companies’ outstanding shares lost N1.484 trillion, closing lower at N26.451 trillion, compared to the opening value of N27.935 trillion on July 1, 2022.


Capital market operators said the poor performance of the market was as result of rising interest rate, insecurity, uncertainty in the global economy and other macroeconomic challenges experiencing in the country.


The market during the quarter witnessed interest rate hike as the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) voted to raise the Monetary Policy Rate (MPR) by 150 basis points to 15.5 per cent, the third consecutive rate hike and the highest since the MPC replaced the Minimum Rediscount Rates (MRR) with MPR in 2006.


In addition, the Committee also review upward the Cash Reserve Requirement (CRR) to a minimum of 32.5 per cent while retaining the asymmetric corridor around the MPR and liquidity ratio at +100bps/-700bps and 30.0 per cent, respectively.


It would be recalled that the domestic equity market was in positive trend from the previous year of 2021) to the first half of 2022 with a return of 21.3 per cent.
Available data showed that in the first two quarter of this year, the market closed in positive note, growing by 10.3 per cent in the first quarter and 9.9 per cent at the end of June this year.


However, as the market entered third quarter, with the increase in MPR, investors started off loading their Investment in equities to take advantage of the rising yield in the fixed income market.
Commenting on the performance of the stock market in the third quarter of 2022, a financial analyst, Mr Peter Chigbo said that whenever the apex bank increase interest rate to tighten monetary policy with the aim to bring down inflation in the country, the policy has its own effect on the capital market.


This according to him could result in tradeoffs in the stock market by investors shifting their investment from equity to fixed income due to increase in yield precipitated by the interest rate hike.
Chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion said the market was volatile, mixture of bargain hunting and profit taking in Q3 due to the rate hike.


According to him, the rate hike adjustment has triggered another round of sector rotation and selling pressure in the market, as a result of aggressive hawkish monetary policy across the globe, which caused some countries to go back to intervention strategies to prevent the collapse of their economy.


Omordion pointed out that the the nation’s high debt profile would not survive this rising rate, even as the World Bank and IMF have warned central banks to rethink and avoid pushing the global economy into recession.


“We see that is already happening in UK, China, Japan and others. It is time for the Nigerian central bank and its Monetary Policy Committee to have a rethink before things goes out of hand.”


He stressed the need for a stronger and vibrant economy that would reflect on the capital market so that the 2022 financial year would end on a positive trajectory.
“We need to finish the year strong. The low valuation of NGX, high earnings and dividend yields on improved earnings released so far in the year, coupled with the expectation of third quarter corporate earnings is expected to shape the market direction.
“However, with inflation hitting 17 years high above 20 per cent, many players stay on the fence, waiting to confirm direction before jumping in, as outlook for the economy and the financial market remains unpredictable.


However, he added that there are stocks investors should pay attention to, as the correction in the NGX index action create buying opportunity in some sectors and stocks with high dividend high yield and positive earnings growth.


“Despite the lingering high interest rates atmosphere, rising inflation and slowing industrial output as a result of policy changes and uncertainty around the globe, there are sectors, industries and individual stocks that are still seeing positive activities from traders and investors.
An investors in the market, Mrs Florence Igbokwe attributed downward trend experiencing in the stock market to the problem of insecurity in the country.


She said that investors prefer to invest their funds in a secured environment.
She said although there are other social and economic challenges affecting the market, the Russia- Ukriane crisis has its own negative impact on the nation capital market. She urged the federal government to address these issues, especially the problem.of insecurity to reverse this ugly situation in the stock market.