Delayed cabinet formation hurts Nigerian stocks amid dampened mid-year earning expectation

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The failure of President Muhammadu Buhari to appoint cabinet members six weeks after being sworn in for a final-four year term is weighing on the country’s stock market, and has made investors develop some form of scepticism towards the Lagos bourse.

The delay in forming executive council members may further hurt equity pricing in the short-term as investors are pricing in economic uncertainties and lack of a clear-cut in policy direction in their stock valuation.

Ideally, value investors take position in cheap stocks with strong fundamentals ahead each earning season, but reverse is the case for this half-year period, as the equities market closed in red territory in five trading days out of six (to Monday July, 8).

Some corporates have announced their closed period to enable them consider their financial scorecards for the first-six month of the year, which would have prompted value investors to find their way back into the market, but they seem showing apathy till they understand the policy direction of the Buhari-led administration

Analysts at Lagos-based investment house, United Capital Plc in their note to clients, maintained that investors’ sentiments would be divided between those taking positions ahead of mid-year earning period and those awaiting clarity on the polity environment

“We expect sentiments to be caught between bargain hunters that are taking position ahead of the second quarter earnings season while seeking fundamentally sound stocks trading at cheap valuations, and market pessimist awaiting clarity on the polity environment”

Stocks at Customs street ended their five-day losing streak to gain a marginal 0.07 percent after Monday’s trading, but has lost N141 billion so far in second half of the year.

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