Emmanuel Ochayi
The Nigerian stock market opened the week strong on Monday, recording a 0.62% rise, as investors turned their focus to the third-quarter (Q3) earnings season. Despite concerns about rising inflation, market participants traded actively, pushing major stocks higher.
“We expect mixed sentiments to persist in the stock market due to inflation, especially driven by high fuel prices,” said analysts at Lagos-based United Capital. This rise comes amid predictions that higher petrol prices will push Nigeria’s inflation rate even further, according to an upcoming report from the National Bureau of Statistics (NBS).
Join our WhatsApp ChannelPetrol Prices and Inflation Affect the Stock Market
Analysts believe inflation remains a key factor impacting the market. As petrol prices climb, inflationary pressures grow, making cautious investment strategies essential.
“The Monetary Policy Committee hiked rates by 50 basis points in response to inflation concerns,” noted the United Capital team. “This move will likely influence investor behavior in the stock market over the next few months.”
Investors remain watchful of stocks with strong fundamentals as well as companies poised for long-term profitability. Analysts suggest that investors are likely to focus on equities expected to show sustained positive performance into 2024.
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Key Stocks Driving Market Gains
Monday’s trading saw significant activity in key stocks like Cutix, Zenith Bank, Chams, UBA, and newly listed Aradel Holdings. These stocks helped boost the Nigerian Exchange Limited (NGX) All-Share Index (ASI) and market capitalisation, which rose from 97,606.63 points and ₦56.08 trillion, respectively, to 98,207.81 points and ₦59.51 trillion.
In particular, stocks such as Mecure and Nascon stood out. Mecure jumped from ₦10.10 to ₦11, adding 90 kobo or 8.91%, while Nascon rose from ₦30 to ₦32, adding ₦2 or 6.67%. These gains were instrumental in setting a positive tone for the week in the stock market.
Investor Strategies for the Rest of the Year
Experts advise a cautious approach for investors looking to navigate the volatile market conditions. “We expect this rate hike to influence market trends, with investors adopting a more cautious trading approach,” United Capital analysts stated.
This strategy involves focusing on equities with strong fundamentals and companies with solid earnings prospects for 2024, beginning with their Q3 financial results. Analysts predict that corporate actions such as dividends and stock buybacks will continue to drive positive market sentiment.
“We advise fund managers to consider increasing their cash positions to take advantage of market volatility,” United Capital analysts added. “Maintaining a long-term investment strategy, particularly over the next three months, will allow portfolios to benefit from positive sentiments during the earnings season.”
Stock Market Outlook for Q4 2024
As the year progresses, analysts expect further market rebalancing activities. “The cyclical portfolio rebalancing expected toward the end of the year will offer new trading opportunities,” said United Capital analysts. They emphasise that Q4-2024 could see an increase in trading activity as investors position themselves for these shifts.
Investors are advised to remain vigilant and flexible, adjusting their strategies to align with the evolving market conditions. The stock market remains a space for cautious optimism, as rising inflation and interest rates continue to shape the outlook.
