Afrinvest: Investors to Re-price Financial Assets as 2015 Polls End …

With the conclusion of the cyclical election phase in most parts of the country yesterday, there are expectations that investors will further re-price risks in the Nigerian economy and financial markets, discounting for political risks.

The investment and financial advisory firm, Afrinvest, who made this disclosure at the weekend said Nigerian investment climate should expect a bullish capital market this week, similar to the one witnessed after the presidential election.

It, however warned that the continuous decline in the level of external reserves ($29.6bn), low oil prices and fiscal challenges remain a drawback on investor sentiments.

“Occasioned by the success of the presidential polls, the equities market posted a mouthwatering 16.9 per cent W-o-W return a fortnight ago. However, momentum in the Nigerian Bourse eased last week as the NSE ASI declined 2.2 per cent W-o-W on the back of profit taking activities across sectors. Hence, market capitalisation shrank by N232.5bn even as YtD return berthed at 0.8 per cent after undulation between negative and positive return last week. Activity level measured by volume and value traded for the week was mixed as volume trade rose 33.4 per cent W-o-W whilst value traded dipped 31.1 per cent W-o-W, the report said.

During the week under review, Diamond Bank, Standard Insurance and FCMB recorded the highest activity by volume traded whilst Diamond Bank, Zenith and Guaranty posted the most value traded.

All sector indices save Consumer Goods (+1.0 per cent), reported losses amidst short term profit taking during the week. The Banking Index depreciated the most due to W-o-W losses in Guaranty (12.1 per cent and Zenith (6.1 per cent). The Oil & Gas (6.1 per cent), Insurance (2.0 per cent) and Industrial Goods (1.9 per cent) all trailed in that order.

Market breadth (Advancer/ Decliner ratio) moderated Wo-W to 0.47 xs as 25 stocks appreciated in prices against 53 laggards. Contain (+34.5 per cent), Nesmith (+19.2 per cent) and Learn-Africa (+18.9 per cent) championed the price winners' tables whilst Wema Bank (-14.4 per cent), International Breweries (-14.08 per cent) and Seplat (-12.5 per cent) topped the losers' table.

Analysts from Afrinvest said they expected the momentum in the equities market to strengthen this week on the anticipation that events in the polity will stabilise further on the assumption of a peaceful gubernatorial election at the weekend.

In contrast to the public apprehension that preceded the March 28th elections, the generally peaceful conducts of the Presidential election and the attendant acceptance of the outcome by major political parties has significantly doused political tensions and lifted investors' confidence. The Nigerian equity market rallied 12.2 per cent in two days after President Jonathan conceded defeat, while yields were pressured downwards in the fixed income market as investors hunted for bargains.

In a show of confidence, Moody's Credit Ratings Agency admitted that the peaceful conduct of the March 28th elections was positive, but retained Nigeria's credit rating at Ba3 Stable, three levels below investment grade, as it noted the apparent fiscal challenges and weakened macro fundamentals.