The rising interest rate in the debt market has forced the equities market to close the month of May, 2021 in an N812 billion loss to investors.
This was in spite of the positive sentiment expressed by various equity analysts last month that the local bourse would sustain an uptrend after recording an uptick of 2.02 percent in April.
Recall that the activities in the market have been a struggle between the bears and bulls since the beginning of this year. The market had recorded a massive capital appreciation in January, 2021, rising by 5.37 percent after investors gained N1.131 trillion driven by low yields in Treasury Bills (TBs).
However, in February, the market went on a full reverse, wiping out all the gains recorded in January following a shift in investors’ preference to fixed income in response to the uptick in TBs yields, leading to a whopping loss of N1.38 trillion or 6.16 percent to the bearish market during the month.
The market sustained the downward tempo in March, albeit marginally (0.33%) as yields in fixed income continued to trend upwards. However, the two month losing trend was halted in April following the buy interest triggered by the full year 2020 earning reports, but reverted to the red zone in May.
Specifically, the market capitalisation of all listed equities, yesterday, dropped to N20.035 trillion from N20.847 trillion in April, showing N812 billion or 3.9 percent decline. The All Share Index (ASI) also declined by 3.51 percent to settle at 38,437.88 points from 39,834.42 points. In his comment, David Adonri, CEO, Highcap Securities, said: “It indicates that investors’ confidence in equities declined in May. Equity’s rebound in April was propelled by impressive full year results which surpassed investors expectations. However, after that re action, interest rates started rising in the primary market for debt which mopped financial assets away from equities. There was also no extraordinary price sensitive information to drive equities in May which the market had not already reacted to in April.” On the outlook, he said: “June is not expected to be different from May because the second quarter results will come in July. The market can also change in June if propelled by yet unknown price sensitive developments.”