On Monday (23/11/2020), the equities market witnessed panic selling amid knee-jack reactions to the negative GDP report published by the NBS over the weekend. Surprisingly, the selloff occurred despite the rather impressive 9-month earnings announced by the top banks on Friday (20/11/2020) as well as an obvious improvement in economic performance based on the GDP report.
Interestingly, share prices rebounded on Tuesday, as buyers returned to the market. Accordingly, the market pulled back from the panic selling observed on Monday.
Despite the rather depressing state of the domestic macroeconomic environment, we maintain that the investment case for Nigerian equities remains compelling. Our position is supported by the persistent low yield environment and the elevated liquidity in the financial system.
These factors, coupled with the more competitive dividend yields as well as the earnings stability of operators in the Banking, Cement and Food processing sectors, are expected to considerably support demand for equities by risk-tolerant investors in the interim.
Notably, The Monetary Policy Committee voted unanimously to keep the policy rates unchanged, a move expected to sustain demand for equities. Looking forward, treasury bills maturities worth N150.0bn are due on 26th November.
In addition, the CBN is holding a PMA auction, with N131.0bn worth of bills expected to be rolled over. On the back of the foregoing, we opine that interest in the equities market will be sustained due to a potential decline in stop rates at the NTB auction.