Emmanuel Ochayi
Equity Market Climbs Despite Inflation Concerns
In a trading week that ended on Friday, October 18, Nigeria’s equity market surprised many by rising 0.47%, defying inflationary pressure. The National Bureau of Statistics (NBS) had recently reported a September inflation figure of 32.70%, driven by the sharp rise in petrol prices. While this created concerns, the equity market still managed to close the week on a positive note.
Many analysts predicted that the Central Bank of Nigeria’s (CBN) hike in the Monetary Policy Rate (MPR) would lead to caution among investors. Yet, despite inflation and tighter monetary conditions, the Nigerian equity market managed to push ahead.
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During the review week, investors largely focused on consumer goods, industrial stocks, and oil & gas counters. The rise in the equity market came as investors sought value in these sectors, despite profit-taking in the banking and insurance sectors. Consumer goods stocks attracted attention due to their perceived resilience in challenging economic times, while industrial and oil & gas counters benefitted from long-term growth prospects.
Equity-biased fund managers, initially expected to adopt a cautious approach, found opportunities in these sectors. Despite the challenging macroeconomic environment, they were drawn to attractive prices in fundamentally strong stocks.
The Role of Aradel Holdings’ Listing in the Equity Market
One key event that added momentum to the equity market during the week was the listing of Aradel Holdings Plc. The company’s entry into the Nigerian Stock Exchange added over N3.05 billion to the market capitalization, providing a boost at a time when positive market triggers were scarce.
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The listing brought additional activity and value, especially in the industrial sector, where Aradel Holdings operates. This helped balance out some of the caution that might have prevailed due to inflation and the CBN’s monetary policies.
NGX Performance Amid Broader Economic Challenges
The Nigerian Exchange Limited (NGX) All-Share Index (ASI) closed the review week higher at 98,070.28 points, while the equity market’s capitalization increased to N59.425 billion. This marked a notable gain, considering the economic backdrop, and reflected investor confidence in Nigeria’s long-term growth potential.
Despite the increase, the market’s performance month-to-date declined slightly by 0.50%. However, the year-to-date return stood at a strong 31.16%, indicating that despite short-term fluctuations, the equity market remains a key area of growth for investors.
Outlook for the Equity Market
Looking ahead, analysts remain cautious about the equity market’s performance given ongoing inflationary pressures and the likelihood of further interest rate hikes by the CBN. However, the resilience shown by investors in seeking value during the past week could indicate continued market strength.
While inflation and economic policies may create some volatility in the near term, many investors see the market as a place to find long-term growth opportunities, especially in sectors like consumer goods, industrials, and oil & gas.
In summary, Nigeria’s market has shown resilience despite challenges, and the focus remains on sectors with strong fundamentals as investors adapt to economic realities. The coming weeks will reveal whether this trend can be sustained or if further macroeconomic pressures will shift market dynamics.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
