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Chinwendu Obienyi
Fears that the bearish sentiments which resurfaced on the eve of the Presidential and National Assembly elections would have a negative effect on market capitalisation evaporated suddenly as the Nigerian Stock Exchange (NSE) gained approximately N404 billion at the end of February 2019.
Investors had pulled their profit away from the market due to pre-election jitters. But due to the low priced stocks, earnings result and dividend of some companies, foreign investors defied election fears and increased patronage on the bourse.
According to the NSE Monthly Statistics obtained by Daily Sun, the All-Share Index appreciated by 3.4 per cent or 1,085.4 points from 30,636.36 points to 31,721.76 points while market capitalisation gained N404 billion, increasing from N11.424 trillion to close February at N11.828 trillion.
The growth would have been higher but for the decline recorded in the last two days of the month after the result of the presidential elections were announced in which the Independent National Electoral Commission (INEC) declared President Muhammadu Buhari winner.
Market analysts, however, expressed optimism that stocks would perform better in the second half of 2019.
Chief Executive Officer of the NSE, Oscar Onyema, earlier told newsmen in Lagos that there would be enhanced stability in market activities after the general elections.
His words: “Accordingly, we anticipate volatility in equities markets first half of 2019, with enhanced stability post-elections. We believe swift approval and implementation of the 2019 budget will have a positive impact on companies’ earnings as well as consumer spending. Therefore, we expect an uptick in market .”
Speaking to Daily Sun in separate telephone interviews, analysts predicted that the equities market will see a better outing in the second half of 2019 provided the budget becomes fully operational, better macro-economic policies in place and positive earnings’ results from companies.
Chief Executive Officer, Cowry Asset Management, Johnson Chukwu, believed that low priced stocks created opportunity for bargain hunting and investors took advantage, hence the gain seen in February.
Chukwu, however, noted that the equities market might see a positive rally in the second half of 2019 depending on the policy environment and what kind of returns that will be gotten by quoted companies.
Chief Executive Officer, Crane Securities, Mike Eze for his part, said that shortly after the elections, the market witnessed a downturn because expectations was that someone different would step in with better economic management technique and policies going by their manifesto.
According to him, the market has a self-adjusting mechanism as it cannot go down all the time and it is information driven.
“Foreign investors made a come-back and started buying and the bulls resurfaced. The bulls would go on for a while but not sporadic and we expect to see marginal increases or improvement as well as losses in the second quarter.”
For his part, Chief Executive Officer, Sofunix Investment, Sola Oni said, Forecasting in Nigeria is a bit difficult because of macroeconomic uncertainty that rocks the system. The economy is the underlying asset while the capital market is a derivative of the economy. Performance of quoted companies is hinged on the overall state of the economy. Has this year’s budget become officially operational? What is the direction of the economy? Our market is forward looking and stocks are priced in anticipation of what investors are expecting. If the economy is on the right track, we shall expect upswing and if otherwise, we shall witness downswing.
Oni thereafter called on the government shall begin to address the flash points in the earnest, adding that the stock market remains highly attractive.
“No matter the situation, the Nigeria’s stock market represents low valuation across the board as only few stocks can be said to be overvalued. The market is highly attractive as market fundamentals remain strong,” he said.
