Nigeria: Rejection of Election Results Poses Further Threat to Stock Market Activities - Analysts

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(file photo).
5 March 2019

The rejection of the results of the recently concluded presidential election by the main opposition party, Peoples Democratic Party (PDP) poses further threat to trading activities on the Nigeria Stock Exchange (NSE).

Analysts at Financial Derivatives Company (FDC) gave this warning while reviewing developments in the stock market following the announcement of President Muhammadu Buhari as winner of the election.

They stated: "The NSE All share Index (ASI) endured a three-day losing streak up to February 28th, losing 2.5 percent to close at 31,718.70 points (pts) from 32,515.52 pts on February 22nd, a day before the election. This can be partly attributed to the outcome of the presidential polls. However, the market gained 0.34 percent on March 1st. The rejection of the election results by the main opponent who had dominant support in the South-south (mainly oil producing states) could trigger agitations by the militants. This poses further threats to trading activities in the stock market."

Meanwhile the NSE yesterday recorded positive performance as investors gained N113 billion following buying interest in blue chip companies that have strong fundamentals.

Specifically, the gains recorded by Guaranty Trust Bank, GTBank (+4.8 percent ), Zenith Bank (+2.3 percent) and International Breweries (+8.0 percent) pushed up the Nigerian Stock Exchange, NSE All Share Index (ASI), by 0.95 percent to settle at 32,129.94 points.

As a result, market capitalisation, which represents investors' worth on the Exchange increased by N112.9billion to close at N12 trillion while Year to Date, YtD performance improved to 2.2 percent. However, activity level weakened as volume and value traded dipped 33 percent and 30.3 percent to 227.8million units and N2.6 billion respectively.

The most traded stocks by volume were Diamond Bank (33.0million units), UBA (31.1million units) and Zenith Bank (28.9million units) while the top traded stocks by value were Zenith Bank (N703.1millon), Dangote Cement (N510.8million) and GTBank (N391.0million).

Meanwhile, across sectors, performance was mixed albeit positively skewed, as three of five stocks indices closed in the green. The Banking index was up 2.7 percent on the back of buying interests in GTBank (+4.8 percent) and Zenith Bank (+2.3 percent). Similarly, the Consumer and Industrial Goods indices posted moderate gains, advancing 0.4 percent and 0.3 percent respectively based on price upticks in International Breweries (+8.0 percent ), Dangote Flour (+5.1 percent ), Dangote Cement (+0.2 percent ) and Wapco (+0.8 percent ).

On the other hand, the Insurance index closed in the red, declining 0.2 percent, dragged by losses in NEM Insurance (-2.4 percent) while the Oil and Gas index closed flat at 299.51 points.

Investor sentiment as measured by market breadth improved as 25 stocks advanced against the 10 stocks that declined. The top outperforming stocks were CUTIX (+9.8 percent), NPF Microfinance Bank (+9.7 percent) and WEMA Bank (+9.1 percent) while PZ (-9.6 percent), Livestock Feeds (-9.0 percent) and Law Union Insurance (-5.5 percent) were the least performing stocks.

Analysts at Afrinvest Research said: "We believe that the positive performance recorded yesterday will persist into subsequent trading sessions as investors continue to take positions in fundamentally sound stocks."

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