Ideally, the full-year earnings season should act as key catalyst for an upside trend at the Nigerian stock market, but for a crack created by increased tension as the nation moves closer to its 2015 presidential election this weekend.
Currently, investors are left with no other option than guessing over who will emerge winner after this weekend’s election as opposition party (APC) gives PDP-led incumbent government a hot chase for power.
Foreign investors who control the major chunk of trading at the Nigerian stock market are treading cautiously as they continue to weigh possible risk of the election outcome, leading to lowered demand for Nigerian stocks.
Despite a positive take-off this week at the nation’s bourse, expected low demand for stocks, occasioned by election risk scenario, signposts the pendulum of market returns, expected to swing in favour of negatives at the end of this week.
Also, recent loss of circa N462 billion from the value of stocks has further placed the market capitalisation close to February 14, 2015 level when this forthcoming election was earlier scheduled to hold.
Our trend watch shows that as of February 13, the value of listed equities was N9.20 trillion while the NSE All Share Index (ASI) was at 27,585.26 points.
A month later (March 13), the NSE ASI rose to 30,719.4 points while the market capitalisation reached N10.251 trillion. In the week ended March 20, 2015, the ASI dropped to 29,334.23 points while value of listed equities declined to N9.789 trillion.
This drift in terms of value of equities and performance of the benchmark index despite the expected impact of earnings season clearly indicates the nation had only succeeded in deferring possible reprieve that should have come the way of stocks.
As pre-election sell continue to rub off on Nigerian equities, investment analysts at Lagos-based United Capital plc say although they expect to see a handful of medium- to long-term positioning, “our expectation of generally reduced buying momentum will lead to a relatively quiet market, with negative week-on-week (w/w) return.”
“This week, the observed trend may continue as investors hold back due to the coming elections,” according to Rotimi Peters-led team of economic intelligence at Access Bank plc.
Also, investment analysts at Lagos-based Cowry Asset Management Limited say, “we anticipate low key trading activities ahead of polls on Saturday.”
Considering the recent level of value loss at the Nigerian stock market, analysts believe the market will soon create a new entry point for a subsequent rally. This rally outlook is presumably possible for most value stocks that are currently priced at a discount in the market.
Iheanyi Nwachukwu
