Investment researchers at Bancorp Securities Limited on Monday predicted that trading in the Nigerian Exchange (NGX) would be in ranges with minimal spread in investors’ stake in stocks amid macroeconomic uncertainties of the economy.
The experts, in the firm’s s ‘Weekly Stock Recommendation for Feb 26 – Mar 1 2024’ hinged their forecast on expectations on monetary policy decisions by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), which are expected to influence investment and other decisions of business owners and other stakeholders.
The analysts noted that the domestic economy had been consistently plagued by the unprecedented volatility of the Naira in the foreign exchange market, with the local currency losing 8.29% of its value on the NAFEM window, closing the previous week at NGN1,665.50.
According to them, the apex bank has remained unrelenting in its resolve to hedge the downside of the diseconomies to scale, listing some of its guidelines to stem the volatility of the FX markets in the past week as including but not limited to Reorganizing and optimizing the economic niche of BDC’s in the country through; and Increasing the capitalization of Tier 1 BDC’s to NGN 2 billion (NGN 500 million for tier 2 BDC’s).
Others as listed by the Bancorp Securities’ researchers are Enhancing the scope of the KYC procedure for BDC’s transactions, and updating its regulation in consonance with the objectives of the AML/CFT policies; Clamping down on unlicensed currency speculators (jointly with the EFCC), whose activities have marred the transmission mechanism for the newly instituted FX trading policies.
Based on the measures and other factors, the analysts stated that in the interim, they expected the standardization of the operations of the BDC’s to ensure transparency in the market and improve liquidity, which are ingredients for a proper price valuation.
On the equities market outlook this week, the experts projected: “In this current week, we expect the bourse to trade in ranges, with minimal spreads, this is in expectation of intensified risk averse investors, that are realizing capital gains, the outcome of the MPC meeting during the week, and its attendant effect on bond yields.”
Meanwhile, they recalled that last week, the domestic bourse closed down on a w/w basis, losing 3.44% to bring its year-to-date tally to 36.53%, noting that the intensity of the bearish momentum was underscored by the 0.48x market breadth, measuring the total advancers and decliners through the week.
