Equities sustain rising profile on the Exchange

THE equities market sustained its rising profile on the Nigerian Stock Exchange (NSE), as stocks’ rally continued on the third day of General Muhammadu Buhari’s emergence as President-elect.

Indeed, the resurgence of optimism was captured in an election bounce across local financial markets akin to what analysts tagged ‘Modi’ effect in India in 2014.

Also, the naira rallied against the dollar at the foreign exchange market, trading below N200 against the greenback.

Specifically yesterday, the All Share Index [ASI] appreciated by 3.92 to close at 35,728.12 basis points, compared with the 8.33 appreciation recorded previously. Its Year-to-Date (YTD) returns currently stands at 3.09 per cent.

Market turnover closed positive as volume moved up by 33.21 per cent against 132.33 per cent uptick recorded in the previous session. Guaranty, Fidelity and UBA were the most active to boost market turnover. Zenith Bank and Guaranty topped market value list.

Market turnover rose as volume moved up by 33.21 per cent against 132.33 per cent uptick recorded in the previous session.

Guaranty Trust Bank, Fidelity Bank and United Bank for Africa were the most active to boost market turnover. Zenith Bank and Guaranty topped market value list.

Market breadth also closed positive as Glaxosmith led 55gainers against 11 losers topped by Okomu Oil at the end of yesterday’s session.

Volume shockers included CWG,which led the list of active stocks that recorded impressive volume spike at the end of yesterday’s session.

Stocks’ rally on the NSE was remarkable on Tuesday when the All Share Index (ASI) logged the highest ever one- day gain (8.3 per cent), which has wiped out previous YTD weakness, while yields on naira bonds shed ~100bps intra-day to sub-14 per cent levels even as Eurobond fell below six per cent for the first time since December 2014.

At the official market- the Interbank Foreign Exchange Market, according to the Central Bank of Nigeria (CBN), the naira recorded 50 kobo rise from N197 to N196.5 against the dollar.

The currency firmed up to less than a naira on the parallel market, from N217 to the dollar on Wednesday. The interbank rate opened at N199.50 to the dollar, a range it has traded at since February, after the central bank pegged the rate, following a de facto devaluation.

Giving an explanation to the trend, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, the election has impacted positively on investors’ confidence, moderating the anxiety and uncertainty that preceded the presidential election.

His words: “The election of a new government heightened the prospect of a new direction for economic and political governance with better outlook for the quality of policy formulation and execution. The outlook for discipline and reduction in impunity in the conduct of government business also looks quite good under a Buhari administration.

“However, there is the need to manage expectations as some of the challenges of the business environment cannot be fixed very quickly. Macro-economic issues such as the exchange rate depreciation and declining foreign reserves are driven by external factors, which are beyond the influence of the administration.

The Acting President of the Association of Bureau de Change Operators of Nigeria, Alhaji Aminu Gwadabe, was quoted as saying that he expected the naira to rise further.

He said: “I think the trend will continue. The naira may appreciate from 211 to something below 197 currently at the interbank market.”

Foreign exchange traders said the demand for dollars had subsided compared to what happened before the presidential poll.

A currency analyst at Ecobank Nigeria, Kunle Ezun, stated that the market had been trading around the general elections and Buhari’s person.

He said: “The market has been trading around sentiments and emotions, this is why the naira is appreciating; nothing has really changed in the fundamentals. There was high demand for the dollar before the election because some people predicted post-election violence. Now, the game is over and there is no violence. So, the demand for the greenback is abating.

“The market is also trading around the sentiment that Buhari will fight corruption, strengthen institutions and eliminate wastages. But after his inauguration, the market will trade around the fundamentals like the oil price, external reserves and others.”

The naira-dollar exchange rate has yet to witness any change on the interbank market.

On Wednesday, the local currency closed at 197 to the dollar, a level it had traded at since February after the Central Bank of Nigeria pegged the rate following a de facto devaluation.

It should be noted that in his presidential promises Gen Buhari, on Monday, March 23, said he would ensure that the naira was equal to the dollar in value, if voted into office.

The naira has mostly traded in a range of 198 to 200 per dollar since mid-February when the central bank scrapped twice-weekly foreign-exchange auctions at which the naira was sold to banks at a subsidised rate in a band that varied a maximum of five per cent on either side of 168.

Head of Research at Afrinvest, Ayodeji Ebo, stated that the peaceful conclusion of the election has calmed the fears of foreign investors concerning the market. “Investors were waiting on the sidelines to see election concluded in a peaceful manner. So everyone is taking positions now while those that are in are not willing to sell,” he said.

The index currently stands at 34,400 points, extending gains to a ninth successive session. Thus making it the longest winning streak this year following the peaceful handover.