Nigeria’s stock investors may have to further their sit-and-wait stance at the stock market.
This ugly situation became worse after weekend postponement of Nigeria’s election which, in addition to oil price decline, had been the major driver of investors’ pessimism about Nigerian stocks and the resultant limitation of investible funds flow into the nation’s stock market.
“We believe that the rescheduling of the general elections is tantamount to deferring both socio-political stability, and consequently, reprieve for the financial markets. We believe this does not in any way bode well for ailing investors’ confidence and already lean capital inflows,” said market analysts at WSTC Financial Services Limited.
These analysts said they expect market reaction to elevate political risks to create attractive entry points, “we hold a cautious view on equities.
“Except for a significant reversal in the international prices of crude oil in the near term (which looks most unlikely), we expect the lull in the equities market to remain, at least, in the pre-election period, given a strong positive correlation between the performance of the Nigerian equities market and investors’ perception of domestic risks. In addition, we reckon that expectations of depressed corporate earnings and low dividend payout (on account of regulatory headwinds in the banking sector) will further subdue prices in the equities market in the near term.”
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In the week preceding earlier date for the elections, the stock market rallied by 1.43 percent on the back of speculative activities and a brief recovery in crude oil price.
The local equities market closed positive for the week having posted strong gains for the first three consecutive sessions, though profit-taking in banking stocks depressed the market in the last two sessions.
The Nigerian Stock Exchange (NSE) All-Share Index and Market Capitalisation appreciated by 1.43 percent and 1.61 percent, respectively, to close last Friday, February 6, at 29,985.08 points and N10.005 trillion, respectively.
Similarly, all indices finished higher during the week in review with exception of the NSE Insurance Index and NSE Oil/Gas Index that declined by 0.02 percent and 0.13 percent, respectively, while NSE ASeM Index closed flat.
Forty-two equities appreciated in price during the week in review, higher than 28s equities of the preceding week. Twenty-nine equities depreciated in price, lower than 41 equities of the preceding week, while 125 equities remained unchanged lower than 127 equities recorded in the preceding week.
With the negative take-off this week after losing over N200 billion on the first trading day, negative reactions are trailing the possibility of the stock market sustaining last week’s gain.
“We believe that the political activities will drive market momentum in the run-up to the elections as the postponement of the general election has heightened the degree of uncertainty in the polity. We see a negative close for the week as the market is expected to trade on caution,” said market analysts at Lagos-based United Capital plc.
“We believe the outcome of the general elections will largely influence the perception of major foreign and domestic investors regarding the safety of investing in the nation’s financial market. As such, we do not anticipate major trading activities or fantastic returns on investments in February,” according to another Lagos-based investment house, Meristem Securities Limited.
They had imagined that activities in the financial market will slow down as stakeholders keep watch of unfolding events in the socio-political space throughout the electioneering process.
Analysts at United Capital further said: “We believe investors will prefer to play with caution in the run-up to the new dates for the elections, even as we continue to expect muted foreign portfolio inflows following the local and international criticisms that trailed the decision to delay the polls.”
Iheanyi Nwachukwu
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