Stock Market Rebounds on MPR Cut

After reaching the lowest point since February 2015 in prior session, the Nigerian equities market rebounded today following cuts in MPR (from 13.0% to 11.0%) by the monetary authorities yesterday. The All Share Index rose 0.5% to settle at 27,743.92pts today.

Investors gained a total of N52.3bn as market capitalization increased to N9.5tn. Market activity was mixed as volume and value traded closed 203.8m units (+15.6%) and N2.8tn (-10.1%) respectively.

Sell Down Persists in Oil & Gas Sector
Positive performance was recorded among all the sector indices within our coverage save for the Oil & Gas sector which declined 0.4% as a result of losses sustained in MOBIL (-5.0%) and OANDO (-0.3%).

The Banking index led the gainers having improved 1.1% on account of investor optimism on sector bellwether GUARANTY (+4.7%) and also DIAMOND BANK (+5.1%). Due to price appreciation in DANGOTE CEMENT (+1.3%), the Industrial sector gained 0.6% at the close of trade. The Consumer Goods and Insurance sectors improved 6bps each.

Market Sentiment Remains Low
The market breadth remained 0.6x as observed in the previous session; 12 stocks advanced while 19 stocks declined. Top gainers were CAVERTON (+9.3%), DIAMOND BANK (+5.1%) and IKEJA HOTEL (+5.0%) while top losers were ETERNA (-8.5%), UNITY BANK (-5.3%) and MOBIL (-5.0%).

We believe that today's gain is largely connected to the MPC's decision to reduce interest rate to 11% with an asymmetric corridor of +2% and -7%, further boosting system liquidity. Thus, forcing fund managers to reallocate funds to equities. Nonetheless, we advise investors to tread cautiously as market sentiment remained broadly weak.