Despite expectations that the 2023 general elections will further dampen confidence in the Nigerian stock market, the market opened the week positive yesterday, extending gains from last week as the benchmark index closed by 0.69% to settle at 55,328.42 points.
Some market operators who spoke to Nairametrics said the equities market defied election jittery thanks to the anticipated 2022 full-year dividend payout and hopes that the outcome of the results will not throw the nation into unimaginable crisis.
Market performance: Trading activities on the market heavyweights like BUA Foods which gained +4.65%, along with tier-1 banks, Zenith Bank with a gain of +0.78%, GTCO grew by +1.96% and Stanbic IBTC with +10.00% sustained the equity market in the green territory.
Consequently, the year-to-date (YTD) return rose to 7.96%, while market capitalization gained N207 billion to close at N30.14 trillion.
Further analysis of the day’s market trading showed trade turnover settled lower relative to the previous session, with the value of transactions down by 38.84%.
A total of 149.78 million shares valued at N1.54 billion were exchanged in 3,186 deals. Oando with a gain of +10.00% led the volume chart with 62.64 million units traded while Zenith Bank with a gain of +0.78% led the value chart in deals worth N205.55 million.
What market operators said: The President of the New Dimension Shareholders Association, Mr. Patrick Ajudua, said the political momentum has not gotten into the chaos that will rob the market of confidence.
He added that the portfolio investors are positioning for dividend pay-out which some publicly-quoted companies have already begun to announce. This explains why the market has remained amid election jitters.
Also, reacting to the development, Mr. David Adonri the Executive Vice Chairman of Hicap Securities Limited, told Nairametrics that the equities market is defying current political uncertainties because investors are anticipating a bright yield environment. He added that the activities of political gladiators seem to favor the market in the near term.
He further noted that due to cash scarcity, some investors are also moving their money to other financial instruments like stocks.
- “We are in the earning season when the market normally sustains positive sentiment. But this season is within the period of an election and within this period the economy is in distress.
- “The market doesn’t normally like political uncertainty. Why the market is galloping this time is that investors are beginning to see signs that the outcome of the political activities will be in favor of the market.
- “The market can be futuristic, which is proactively reacting to future expectations, and from the indication, the market is proactively hoping that the future will be priced based on the outcome of the political event.
- “It is not unlikely that cash scarcity may also have made investors transfer their cash in the banks to other financial assets, especially shares. If the idle money is with the CBN, it will not yield returns,” he said.
Demographic shift: In a chat with Nairametrics, the Managing Director of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe, said that a demographic shift has happened in the NGX over the last few years.
- “We now have more local institutions and retail investors in the market than foreign portfolio investors. The reverse used to be the case, this shift has naturally reduced volatility in stock prices as the locals are likely to have more faith in the local market than foreigners. That’s why you see the NGX ASI continuing to rise despite all the uncertainties in the environment. My prognosis is that while we might see a slowdown as we move closer to the elections we are unlikely to see a significant decline in stock prices mainly because of what I have highlighted. However, if the election were to degenerate into chaos then the scenario might change significantly,” he said.
He noted that COVID-19 Pandemic and foreign exchange drove international investors away from the market and were taken over by local investors who do not have to worry about foreign Exchange and are likely to be more optimistic about their country.
- “The local investors don’t have anywhere to go and they are bearing with some of the risks foreign investors are afraid of like insecurity and other economic headwinds. The election cannot be said to be perfect but the kind of crisis that normally follows an election in the country has been drastically reduced,“ he said.