BUHARI'S ELECTION TRIGGERS RISE IN STOCKS

The basic health barometers of the Nigerian Stock Exchange (NSE), on Wednesday responded in an unprecedented manner to the official announcement of General Muhammadu Buhari as fourth President of Nigeria since May 29, 1999, in the early hours of the day, after a keenly contested election laced with many anxious moments in its build up.

In apparent reaction to the successful conclusion of the Presidential election with the announcement of Buhari as winner by the Independent National Electoral Commission (INEC), market capitalisation jumped by N903.435 billion or 8.42 per cent. Capitalisation closed at a new high of N11.62 trillion, while the All-Share index similarly rose by 2,635 basis points or 8.30 percent, the most among 93 global indices tracked by Bloomberg.
In what showed that the successful election was a confidence booster, 65 stocks recorded gainers, many of them strong, leaving just three others on the decliners’ side. The gainers included Nestle, N47.00 each; Seplat Petroleum Development Company, N31.50 per share; Dangote Cement, N16.40; Forte Oil, N18.14 and Nigerian Breweries, N14.64.
The surge was the most significant since March 2010, which was the height of a nine-day rally, the longest since December 2012.
According to research analysts at Lagos-based investment banking group- Dunn Loren Merrifield Limited, “the last time the index recorded such a day-on-day performance was May 30, 2014, with a 1,188-point gain.
“We believe the key driver of the positive market reaction is a direct result of the successful conduct of Nigeria’s 2015 presidential election and the resultant calm political atmosphere,” the report made available to our correspondent added.
As a result of the recovery by mid- and large-cap stocks, year-to-date loss on the bourse reduced to 0.78 per cent, “with a substantial improvement in market breadth. In addition, all NSE sectoral indices closed higher on the day, with NSE-industrial (+9.76 per cent) taking the lead.
“In spite of the rally seen thus far, valuations remain at significant discounts to other emerging markets, based on forward earnings. Hence, we see ample capacity for significant return on capital to investors via dividends and capital appreciation. The conclusion of the 2015 general election and earnings will increasingly be the key driver at this stage of the market cycle. Markets will of course continue to face some risk of correction due to profit taking and portfolio rebalancing,” he added.
Reacting to the gain, stockbrokers who spoke to Daily Independent said the development also resulted from the acceptance of defeat by incumbent President Goodluck Jonathan, who has since congratulated the President-elect.
Mathhew Ogagavworia, a stockbroker and chartered accountant, told **Daily Independent** that the development is good for the market and as it would encourage the return of investors who left the market in a flight for safety few months ago.
His words: “It shows there is hope that the people who were staying back because of the election will no longer have excuse to do so again. With the conclusion of the election and the magnanimity of the incumbent president to accept the result and congratulate the winner, more rallies will be seen in the market going forward.
“We will see the market getting back the lost value. The market is good and the confidence in economy will grow. This development has shown that Nigerians preferred the President-elect and those who are worried that the election may lead to crisis have been disappointed and the country will be better for it”.
Agreeing with Ogagavworia, Tola Odukoya, chief executive of Dunn Loren Asset Management & Research Limited, said the outcome of the election has restored the much-needed confidence that the market has been looking for. Soon, he believes, the country will reclaim its rightful position in the comity of powerful economies.
“We are now gradually moving to the league of great countries that can conduct and superintend credible election. The President’s statement is conceding defeat has brought confidence needed in our democracy and this will in indeed have impact on the economy and the capital market. That is what we are seeing now”, he stated.
Meanwhile, investors traded a total of 881.584 million shares, valued at N10.938 billion in 4,611 transactions compared with 379.330 million shares, valued at N2.554 billion in 2,363 transactions recorded on Tuesday with the financial services sector accounting for a total of 756.636 million shares valued at N7.228 billion in 2,696 transactions as against 292.905 million shares valued at N2.554 billion in 2,363 transactions recorded the previous trading day.
However, investors traded a total of 407.013 million banking sector shares valued at N4.886 billion in 1,085 transactions, compared with 206.673 million shares worth N2.12 billion in 1,459 transactions.
Gains in the Nigerian bourse resounded in far away South Africa, where the Johannesburg Stock Exchange rose slightly, buoyed by telecoms operator MTN Group, whose biggest operational base in Nigeria in terms of revenue and subscriber base.
MTN shares ended nearly 6 per cent higher, pushing Johannesburg’s Top-40 index up 0.2 percent to 46,128. The All-share index added 0.2 percent to 52,281.
“MTN was on the back of the Nigerian election. A lot of people thought the elections wouldn’t go through smoothly,” said Chad Bushnell, a trader at Anglorand Asset Managers.
Also, reacting, Nigeria’s $500 million of Eurobonds due July 2023 rose for the 11th day, pushing the yield down to the lowest since December 8, as President Jonathan conceded defeat, reducing the threat of post-election violence that marred previous votes.
“The political risk has certainly decreased,” said Thabo Ncalo, a money manager at Stanlib Asset Management Limited, which oversees about $45 billion and has been adding to its Nigerian holdings, said by phone from Johannesburg. “It bodes well for investing in Nigeria. It boosts the case for coming back into the country.”