Nigerian equities have seen a bullish run in the last nine days (up 17.2%), as the market remained upbeat on election outcome contrary to analysts expectation of a wait-and-see pre-election scenario.
Following the election of Muhammadu Buhari as Nigeria’s next president, the positives it brought to the stock market did not come in isolation as many speculative buyers may decide to take profit from recent gains of over N1.82 trillion.
For most investment analysts, investors should approach Customs Street this week with caution by playing strictly on fundamentally viable stocks.
In just four trading days of last week, equities market capitalisation rose from N10.32 trillion to N12.135 trillion while the Nigerian Stock Exchange (NSE) All Share Index (ASI) rose by 16.90 percent to 35,728.12 points from 30,562.93 points at the beginning of last week.
“We expect the renewed optimism in the equities market and the country as a whole to trigger investors’ confidence, especially the foreign players. We however advise investors to tread cautiously in the light of potential profit-taking by short-term investors,” said investment analysts at Meristem Securities Limited.
Also, these analysts linked recent bull-run in equities market to the peaceful conduct of the general election, in addition to earnings releases and corporate actions that aided the revival of interest in the equities market.
“Profit-taking will follow, yet the surge reflects relief that the margin of victory was comfortable, that the process was broadly peaceful, and that the loser (the incumbent) rapidly accepted defeat and congratulated his opponent (Muhammadu Buhari),” said analysts at Lagos-based investment house, FBN Capital.
“The presidential handover is not due until late May, and at this stage we are limited to conjecture. The APC is a coalition of political parties. Even without detailed manifestos, it is clear that it embraces different ideas about the management of the economy. It would be dangerous to assume, for example, that the new administration will unleash free market forces. It will be subject to the same fiscal constraints because a marked recovery in the oil price this year is unlikely. There are not plentiful funds to throw at favoured projects. If it wants to extend the safety net for low-income Nigerians, it will have to generate additional revenues,” FBN Capital analysts said.
“Despite the moderation in political risk post-presidential elections, the breather in the market Monday was expected given the impressive 10-day gaining streak. We expect that the market will broadly trade sideways this week as short term investors sell down to take profit while medium to long term investors continue to take position in value counters”, said research analysts at Afrinvest.
“Following the peaceful conduct of Nigeria’s presidential election last week, the financial markets rebounded sharply with renewed optimism. We think the market is re-pricing the socio-political stability faster than other current fundamentals suggest given the fiscal strain expected to be encountered by the incoming government as well as the bleak outlook for oil prices,” said markets analyst at Lagos-based United Capital plc.
The analysts remain optimistic on the direction of the stock market this week as they expect current positive sentiments to continue to drive investors’ appetite. “We believe there is still further upside from a valuation point of view; hence, we expect the market to close positive this week,” they said.
IHEANYI NWACHUKWU
