Stock Market’ll Suffer From Poll Delay, Experts Say
The nation’s stock market will react negatively to the postponement of the general elections, financial experts and capital market operators said on Sunday.
The market has been wobbling in recent months as it took a beating from the uncertainty around the general elections and interest rate hikes in the United States.
It plunged to its lowest level in more than one and a half years on January 9 as the market capitalisation of equities listed on the Nigerian Stock Exchange fell below the N11tn mark. It rose to N12.20tn on Friday as investors were said to have tentatively started to pick up shares to position for a post-election rally.
Experts, who spoke with our correspondents in separate interviews, said the stock market would take a hit from the election postponement.
“People will be more apprehensive because stock markets are allergic to uncertainties,” the Managing Director and Chief Executive Officer, Financial Derivatives Company Limited, Mr Bismarck Rewane, said.
He said, “The uncertainty premium has been increased because we have another unknown variable – we do not know whether the elections will hold again next Saturday and what the outcome will be even if they hold.
“Markets are very sensitive to unknowns and uncertainties. The initial reaction on Monday (today) will be negative because of the uncertainty that has been introduced, but after a while, the market will factor in that uncertainty and come back to normal. The market will normalise by Wednesday.”
The Chief Executive Officer, Enterprise Stockbrokers Plc, Mr Rotimi Fakayejo, said investors would express their disappointment about the postponement of the elections.
He added, “It is going to cast doubt on the outcome until the elections take place and they run smoothly. That is when people will start having confidence in the market again.
“So, it is most likely that in the first two days of the week, we are going to see the market going south. Thereafter, there may just be some stability and further correction after that.”
Noting that there might not be a sharp drop on Monday (today), he said foreign investors might hold back for two days.
The Managing Director, Afrinvest Securities limited, Mr Ayodeji Ebo, said, “In my view, I don’t expect a sharp reversal of the past gains in the stock market but there may be a slowdown in additional investments on Monday to gauge direction.”
Ebo said he was surprised to see the capital market benefit significantly from capital flows in the past two weeks despite the election concerns.
He said, “I’m aware the foreign portfolio investors don’t like uncertainties but the first critical risk to them is the stability and liquidity of the foreign exchange. Nigerian stocks traded at a significant discount to frontier markets for the first time in the last seven years; this presents significant upside.
“Also, the relative calmness towards the elections may also be responsible for the influx of FPIs witnessed in the past few weeks. However, if we see any major selloff next week, this should present interesting opportunities for investors who missed out in the market rally early this month.”
The President, Chartered Institute of Stockbrokers, Mr Adedapo Adekoje, said new investors would likely become sceptical to bring in their funds.
Noting that the market had been bullish in the last couple of weeks, he said, “Investors will take advantage of the capital appreciation of some stocks. I can see people taking advantage of the stocks that were bought at low prices.
“Foreign investors will exit and wait to know what the results of the postponed elections will be before they come back.”
The Chief Executive Officer, Sofunix Investments, Mr Sola Oni, said the postponement of the elections deepened the political risk of the country with dire consequences on investment decisions.
He said, “It is not unlikely that trading on the stocks may be moderated by this development as it is capable of further eroding investor confidence in our market.
“Every political decision has a direct or indirect impact on the financial market. I think the time has come for our leaders to stop making Nigeria a laughing stock before the international community.”
