Emmanuel OchayiThe Nigerian Exchange Limited witnessed a surge in the banking index, marking a notable 6.08% increase in investor wealth by N66 billion this past week.
However, this upward trajectory was met with caution as concerns over capital adequacy ratios in banks with international operations rattled the market.
Amidst the buoyancy that propelled the All-Share Index to 71,541.74 and market capitalization to N39.148tn, the week was marked by contrasting fortunes.
Banking stocks flourished with a 5.01% rise, primarily driven by increased investment, while sell-offs marred certain sectors due to revelations by the Central Bank of Nigeria about some banks falling below regulatory capital adequacy benchmarks.
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“The decline in total qualifying capital against increased risk-weighted assets due to the naira’s depreciation impacted banks with international operations,” stated the Central Bank’s second-quarter report on financial soundness indicators.
Despite the overall market growth, certain sectors like Insurance, ASeM, Oil & Gas, and Industrial Goods faced depreciations ranging from 0.54% to 3.03%. This resulted from sell-offs in specific stocks like Oando, MRS Oil, Juli Plc, BUA Cement, Axa Mansard, and Mutual Benefit.
Conversely, the Banking and Consumer Goods indexes saw notable gains of 6.08% and 0.21% respectively, with companies like Ecobank Transnational International, AccessCorp, and FBN Holdings driving the surge.
The trading landscape saw a total turnover of 2.423 billion shares worth N45.07bn in 34,704 deals, indicating a slight decrease from the previous week. The Financial Services Industry led the activity chart with significant contributions to the equity turnover volume and value.
Top gainers included Multiverse Mining and Exploration Plc, Thomas Wyatt, and Infinity Trust Mortgage Bank Plc, while stocks like Consolidated Hallmark Holdings, Oando, Abbey Mortgage Bank Plc, and others faced notable declines.
Analysts foresee potential market corrections and profit-taking activities in anticipation of the reporting and dividend earnings season. “Caution may prevail as stakeholders await the planned stress test of the capital adequacy ratio of Nigerian banks with international operations,” stated analysts at Cowry Asset Management Limited.
This cautious sentiment stems from global risks, including high inflation and forex volatility, prompting investors to tread carefully while anticipating the traditionally hopeful Santa Claus rally.
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