Investors appear confident that the general elections and post-election policies will have no negative effect on the macroeconomic environment.
Major investment firms and market analysts see a stable macroeconomic outlook, a reference to less disruption due to electoral issues and policy changes. They have cited the bullish performance of the stock market as a major indication of investors’ confidence in political system and macroeconomic stability.
“We believe sentiments have strengthened due to the increased investor expectation for post-election stability and positive earnings releases,” Afrinvest Securities stated at the weekend.
With nearly three advancers for every decliner, Nigerian equities sustained a bullish streak for the most part of last week, rallying net capital gain of N442 billion at the weekend.
Nigerian benchmark equities index indicated average gain of 3.76% during the week, lifting the average year-to-date return so far this year to 4.09%
Nigerian equities have rallied N805 billion in net capital gains in 11 trading sessions so far this month, equivalent to average gain of 7.06% so far in February. The bullish sentiments in the days leading to crucial presidential election represented major reassessments of the political risks that had dampened the market in 2018 and January 2019.
The performance of the stock market bucked wide expectations of increased selloffs in the pre-election weeks as investors readjusted their risk profiles amid assurances of a smooth political process.
Cordros Capital, which had maintained a conservative outlook in the immediate period due to political risks, reassessed its outlook to positive at the weekend.
“With election risk now out of the picture, as we anticipate a peaceful exercise, together with the still supportive macroeconomic picture, we guide investors to cherry pick fundamentally sound stocks in a bid to ride the wave of the market rally, post-polls,” Cordros Capital stated.
Market pundits said they expected the continuation of major economic policies.
“We expect the direction of market to be largely determined by the election outcomes next week, nonetheless, we expect the market to perform positively based on the sentiments we have observed this week,” Afrinvest Securities stated.
Analysts at GTI Capital said they expected the market to break into bigger strides this week as election results and corporate earnings combine to stimulate investors’ appetite.
Financial Derivatives Company (FDC) Limited, which noted that at least five Sub-Saharan Africa countries will hold crucial elections this year, pointed out the correlation between controversial elections and economic performance. According to the economic and investment research firm, there is a pointer that stolen elections can lead to violence and negative economic results.
The tempo of activities at the Nigerian stock market has also improved considerably in the past two weeks. Total turnover increased to 2.83 billion shares worth N28.14 billion in 28,739 deals last week as against a total of 1.89 billion shares valued at N26.88 billion traded in 19,213 deals two weeks ago.
Nigerian equities had lost N326 billion in January 2019, capping several months of heightened political risks amid selloffs by foreign and domestic investors. The equities market had also closed 2018 with a net capital depreciation of N1.889 trillion. There was almost a consensus that the market performance in 2018 was due mainly to political risks, macroeconomic uncertainties and attractive yields in advanced economies.