Stock Market Plummets by N1.45trn in One Week on Sell-Offs

Kayode Tokede

The stock market endured a turbulent week, as relentless profit-taking in some blue-chip companies wiped N1.45 trillion from investors’ portfolios, reducing the total market capitalization to N62.85 trillion from N64.303 trillion it opened for trading.

The Nigerian Exchange Limited All-Share Index (NGX ASI) plummeted by 2.94per cent week-on-week (wow), settling at 102,353.68 basis points at close of trading on Friday from 105,451.06 basis points, marking a challenging period for stakeholders navigating an environment riddled with cocktails of macroeconomic uncertainties.

Specifically, investors profit-taking in Dangote Cement Plc that dropped by 16.5per cent or N78.80 per share wow to close at N400.00 per share from N478.80 per share and MTN Nigeria Communication Plc with a decline of 3.7per cent or N9 per share wow to close at N233 per share from N242 it opened for trading contributed to the overall market dwindling performance last week. 

Last week’s sell-off was precipitated by a reassessment of portfolio positions amid disquieting economic data.

The December 2024 inflation report revealed a staggering 34.80per cent inflation rate, compounding investors’ apprehension. The unsettling figures prompted widespread divestment across key sectors, except for consumer goods, which posted rare modest gain.

According to the National Bureau of Statistics (NBS), consumer prices increased for the fourth straight month, rising by 20basis points to 34.80per cent year-on-year (y/y) in December (November: 34.60per cent y/y), bringing the average headline inflation for 2024 to 33.18per cent (2023FY average: 24.52per cent).

Parsing through the breakdown, food prices (-eight basis points to 39.84per cent y/y) slowed after three consecutive months of increase, driven in part by pre-emptive buying in anticipation of price hikes during the festive period and the delayed impact of the harvest season.

Core inflation (+53basis points to 29.28per cent y/y) increased for the third month in a row, primarily reflecting the impact of seasonal demand during the festive period and elevated energy costs on prices of core items. On a month-on-month basis, the headline inflation moderated by 20basis  to 2.44per cent m/m (November: 2.64pepr cent m/m).

Meanwhile, market sentiment was notably cautious, with trading activity significantly muted. Weekly trading volume plunged by 41.4per cent to 2.25 billion units, while the traded value fell 18.1 per cent to N58.83 billion across 63,650 transactions.

Four of the five monitored sectors ended the week in red. The NGX-Industrial index recorded the steepest decline, tumbling 8.20 per cent week on week, largely due to sell-offs in heavyweights like Dangote Cement and Julius Berger. Similarly, the NGX-Insurance index contracted by -6.23 per cent, with Sovereign Insurance and Universal Insurance leading the losses.

The NGX-Oil & Gas and NGX-Banking sectors experienced relatively modest declines of -0.78 per cent and -0.46 per cent, respectively, with negative price movements in stocks like MRS Oil and FBN Holdings.

However, the NGX-Consumer Goods index provided a glimmer of hope, gaining +1.33 per cent week-on-week.

Market analysts predict a volatile yet opportunistic week ahead as investors weigh bargain-hunting against lingering macroeconomic challenges. The approaching Q4 earnings season and the Monetary Policy Committee’s (MPC) meeting are anticipated to be pivotal in shaping market direction.

“For discerning investors, the prevailing low valuations could present attractive entry points, particularly in fundamentally robust stocks. As the market braces for further turbulence, a focus on resilience and long-term growth potential will be key to navigating the uncertainties ahead,” analysts at Cowry Assets Limited stated in their emailed equities market review on Friday.

Analysts at Cordros Research added that, “In the week ahead, we anticipate choppy trading activities in the market as investors continue to rebalance their portfolios for the year. Profit-taking is likely to persist in specific segments of the market, while undervalued and beaten-down names may see renewed buying interest.”