Capital market analysts have said they expect the stock market to build on positive momentum of September and emerge positive in October.
In September, stock market capitalisation rose by N521 billion from N10.208 trillion to N10.728 trillion at the close of trading on September 30, 2015, while the NSE All-share Index (ASI) appreciated by 1,532.93 basis points or 5.16 per cent, from 29,684.84 points to 31,217.77 points, reducing the year-to-date loss to 9.92 per cent.
Market operators attributed the uptrend performance in the month of September to renewal of investors’ confidence.
They expressed optimism that the month of October would be positive as the market awaits the appointment of cabinets by the government and nine-month corporate earnings is expected to impact positively on the capital market.
According to them, the reduction of Cash Reserve Requirements (CRR) reduction by the Monetary Policy Committee of the Central Bank of Nigeria from 31 per cent to 25 per cent would reduce pressure on Deposit Money Banks (DBMs) liquidity since President Muhammadu Buhari implementation of Treasury Single Account (TSA) in September.
The Managing Director of Enterprise Stockbrokers Plc, Mr Rotimi Fakayejo, noted that liquidity in the system has not changed but the ministers expected to be appointed in October and possible impressive results from banks earnings would resurgence investors’ confidence.
He said, “If the CRR was not reduced, the negative effect could have impacted on listed banks’ share prices.
We expect by October, the government will start identifying its economy policy and the capital market will benefit.”
While a few analysts had expected a rate hike as inflation keep increasing, others expected the committee to maintain the status quo for the rate to be unchanged except for the CRR due to the implementation of TSA.
Analysts at Meristem Securities, a Lagos based stockbroking firm, stated that expectation based on the latest MPC decision, will bring about a slight change in system liquidity considering the reduction of the CRR by six per cent while expecting banks to devise innovative means to stay afloat.
They also expect a continued hike in Inflation in line with growing exchange rate pressure.
Analysts at WSTC Financial Services said, the liquidity-easing effect of the reduction in CRR is expected to result in a moderate reduction in yields in the fixed income market in the short term and remain cautious on equities in the mid-term amid expectations of fragile corporate earnings, compelling risk-adjusted returns in fixed income, perceptions of inefficiency in foreign exchange pricing, and weak investor confidence.
They noted that the overall macroeconomic environment remained fragile as the economy continue to slow and in the face of prevailing circumstances, it acknowledged that synergy between monetary and fiscal policies is an option to sustainable growth.
Analysts at APT Securities and Funds Limited also said, “We expect the market to sustain the positive rally as optimism heightens in anticipation of Governments’ policy direction and announcement of cabinet members.”
Source : Leadership