Ministerial appointments’ rally lifts investors’ wealth by N338b

Following President Muhammadu Buhari’s assignment of portfolios to ministers last week, the equities market recorded the first week-on-week gain in eight weeks, causing investors’ wealth to soar significantly by N338 billion in three trading days.

Specifically, the market capitalisation of the Nigerian Stock Exchange, which stood at N13.186 trillion on August 20, 2019, closed at N13,524 trillion last week Friday, adding N338 billion or 2.5 per cent, while the All-Share Index rose from 17,05862 points to 27,800.17 points, representing 2.7 per cent growth.

Also last week, bargain hunting across bellwether stocks triggered market activities, as ASI and market capitalisation appreciated by 3.07 per cent and 3.25 per cent to close the week at 27,800.17 points and N13.524 trillion respectively.Similarly, all other indices finished higher with the exception of NSE Insurance Index, which depreciated by 1.38 per cent, while the NSE ASeM index closed flat.

Notwithstanding the fact that government is yet to roll out the much-anticipated new policies to stimulate activities, indices recorded unprecedented surge last week, revealing the importance of governance, policy-making and economic direction to investor confidence,

With many equities currently undervalued and selling at a huge discount with yields above the inflation and treasury bill rate, experts argued that the current situation reveals the existence of value and the high upside potentials for a rally.

According to them, the prevailing low price attraction and undervalued state of stocks serves as an attraction for smart money at this point considering the fact that yields in the fixed income market and other instruments are declining, due to interest rate cuts across the world that continued to confuse investors

The experts noted that the high yielding stocks would have been a primary beneficiary as investors search for alternative sources of yields or returns, without looking away from safety of their capital

However, they called for a cautious trading, noting that the rebound of the NSE is yet to be confirmed, despite the positive outing lastwek, due to prolonged weak investors sentiment and low liquidity in the market. Analysts at Afrinvest Securities Limited, said: “President Muhammadu Buhari finally inaugurated his cabinet and assigned portfolios to the 43 appointed ministers this week, six months post-elections and almost three months into his second term.

“Considering that it took President Buhari almost six months to form a cabinet in his first coming, this could be considered an improvement.“However, historical evidence suggests that we do not consider this to be a positive signal as the administration’s arsenal resists speedy response to pressing issues.

“In our assessment, competence also seems like an afterthought in choosing the cabinet, considering that majority of the ministers were former politicians without impressive track record of execution, nor the skill required to deliver much needed reforms. “We believe that the bullish run would be short lived due to sustained weak investor sentiment in the market.”

Codros Capital Limited said: “Our view continues to favour cautious trading owing to the fact the gains recorded this week were not broad-based. However, compelling valuations support recovery in the medium to long term.”The Chief Research Officer of Investdata Consulting Limited, admitted that speculators are taking advantage of the seeming improvement in economic indices released recently, as well as the corporate earnings that revealed the true position of listed companies.

Also, long-term investors are reshuffling their portfolios in expectation of interim earnings reports of dividend-paying companies.He, however argued that the rebound of the NSE is yet to be confirmed, despite the positive outing at lastweek.”With the swearing-in of the ministers expect a more speculative move by market players that will be taking a new position, especially the stocks that are selling at a discount.”Discerning investors should target value stocks considering the current low valuation as they position for dividend income and capital gains, especially as the market’s price to arnings ratio remains attractive ” he said.