Investment analysts at Bancorp Securities Limited, one of Nigeria’s investment research and consulting services providers, have predicted likely dovish investor sentiments in the nation’s stock exchange this week based on prevailing micro and macroeconomic indices of the economy.
The experts, in the firm’s ‘Weekly Stock Recommendation: May 20 to May 24, 2024’ sourced by our correspondent on Monday, noted that the downward spiral experienced in the local bourse in the just concluded week, could best be described as a pointer to a likely dovish characterized bourse in coming weeks, particularly with a more than likely hike in policy rates in the upcoming monetary policy committee meeting (MPC)
They stated that the key takeaways from the recently published inflation data by the National Bureau of Statistics included that the headline inflation rate for April rose less sharply than forecasted, up 49bps to 33.69% y/y, marking 16th consecutive monthly increase, driven by pressures in both food and core inflation sub-baskets.
Specifically, the economists recalled that the food and core inflation sub-baskets rose by 101bps and 80bps respectively to record highs of 40.5% and 26.8% y/y, adding that on a month-on-month basis, inflationary pressures eased, with the headline rate at 2.3%, down from 3.0% in March. Food and core inflation also decreased to 2.5% and 2.2% from 3.6% and 2.5% respectively.
According to them, the m/m slowdown is attributed by the statistics agency to the off-season harvest in the North and the appreciation of the Naira, which lowered imported food inflation by 155bps to 2.3% m/m, and that these gains were precipitated from the introduction of cheaper diesel from Dangote Refinery impacted costs positively; reducing production and logistics costs, similarly the NGN-USD rate appreciated by 22.1% in April.
The investment experts anticipated the CBN’s monetary policy committee would further hike the benchmark rate marginally or hold it at 24.75% during the MPC, based on the committee’s likely positive assessment of broad-based economic factors. For May, farm & non-farm inflation is projected to creep slowly and that overall, headline inflation was expected to increase with decreasing momentum.
On the trading outlook in the Nigerian Exchange this week, the experts stated: “From the foregoing, we expect the market positive investor sentiments in the fixed income space, with intensified tradeoffs from the equities market.
“Notwithstanding, growth stocks with good fundamentals are expected to pivot capital gains and are great alternatives for portfolio rebalancing, save for stronger directional news.”
