The Nigerian stock market on Tuesday closed on a bullish note with 5.22% growth. The All Share Index and Market Capitalization closed at 55,738.35 points and N30.350 trillion respectively.
In a stock market review with the MD/CEO of Global View Capital Limited, Aruna Kebira, the following was discussed.
The stock market on Tuesday grew tremendously by 5.22%. What is driving this positive vibration?
When Tinubu was declared the winner of the just concluded presidential elections, there were dissenting voices from various quarters. The populace believes that the aggrieved parties have substantive cases at the election tribunal.
This belief cast uncertainty in the investment space and the market responded negatively. It further kept away the FDIs and diminish the hope of the Local investors.
But yesterday witnessed the swearing ceremony of the Tinubu administration which signals the beginning of his tenure in office as the president of the country.
After the inauguration, he made a speech and made his first appointment.
The market and the nation are convinced that the president hit the ground running and that his tenure possesses good tidings for the economy.
In recognition of that, the stock market started on a bullish run on May 30, right from the start of the market.
Don’t also forget that today is the last day of the month of May and in another two months or so, we shall be seeing the release of the Q2 2023 earnings into the market.
•How sustainable is this growth as 64 equities grew in one day against 12 equities that declined in their share prices?
This might continue in the next week but I am convinced that investors and bargain hunters will begin to take profits but if the frenzy in the market is in tandem with what happened in January of 2018, then the market is in for a long ride.
•How will the removal of fuel subsidy affect the stock market?
The removal of fuel subsidy will inevitably lead to a significant increase in the price of fuel. This rise will directly impact the cost of transportation, affecting the prices of goods and services across the board. The average Nigerian, already grappling with a high cost of living, may experience additional financial strain.
The ripple effect of increased fuel prices will likely lead to a surge in inflation. As transportation costs rise, the cost of transporting goods and services will also increase. This increase in production costs will be passed on to consumers, leading to higher prices for basic necessities, such as food, utilities, healthcare, and a lower disposable income.
Income is either consumed or saved and average savings equals average investment. When prices of goods and services increases and dwindle disposable income, the quantum available for investment will also diminish leading to illiquidity in the market.
When prices also increase, the basket of demand of the consumer will also decrease which will lead to lower turnover by the listed manufacturing company, which will in turn lower their profits. And lower profit will give rise to lower dividend declaration and payment.
But by and large, everything will even up as other policies are put in place that might have a different multiplier effect on the economy.
•What is the outlook for the stock market in this new government?
The market responded to the speech of the president in the short run. The market and its participants are waiting and watching the policies that will be rolled out by the incumbent.
The market will only respond to the positive vibes from the presidency, if otherwise, the market will also reflect it.
But in all, I expect good and developmental policies from this government and therefore the market will fare well.
•The market is still expecting the Audited Reports of FBNH and Presco. What are the possibilities in these two stocks?
The prices of these stocks responded well to the euphoria present in the market arena, but if the market takes them up to their 52-week high prices before the release of the earnings, two things will happen, if the quality of their earnings released is something to write home about, the price will be sustained but otherwise, the market will do its justice, punish the price and return them to their status quo ante.
•What are the stocks to watch?
Nigerian Breweries, Guinness, Presco and Wapco.