Stock Market Retreats Amidst Banking Sector Recapitalization Proposal

Investor confidence in the Nigerian stock market, particularly within the banking sector, has waned following the Central Bank of Nigeria’s (CBN) recent announcement of proposed bank recapitalization measures. The resultant risk-off sentiment prompted profit-taking activities, leading to a substantial loss of N633 billion in market capitalization.

As a consequence, the combined market capitalization of listed equities dwindled to N57.87 trillion by the close of the truncated trading week, marking a 1.1 percent decline from the previous week’s N58.498 trillion. Similarly, the benchmark All Share Index (ASI) of the Nigerian Exchange Limited (NGX) retreated by 1.1 percent to 102,314.56 basis points from 103,437.67 basis points.

The downturn was notably influenced by significant losses in key banking stocks, with Guaranty Trust Company (GTCo) Plc, FBN Holdings Plc, and Zenith Bank Plc experiencing declines of 13.75 percent, 11.15 percent, and 5.88 percent, respectively. Month-to-Date (MtD) and Year-to-Date (YtD) returns also slipped to -2.1 percent and +36.8 percent, respectively.

Moreover, trading activity witnessed a notable decline during the shortened week, with total trading volume and value decreasing by 69.2 percent and 50.5 percent Week-on-Week (w/w) to 734.04 million units and N31.58 billion, respectively.

Sectoral performance mirrored the overall market sentiment, with all major indices recording losses. The banking sector led the decline with a 7.2 percent depreciation, followed by the insurance sector (-2.4%), consumer goods sector (-1.3%), oil and gas sector (-0.3%), and the industrial goods sector (-0.2%).

Looking ahead, analysts at Cordros Capital anticipate continued negative market sentiment as investors react unfavorably to the potential dilution resulting from the CBN’s recapitalization initiative.

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