Stock Market Gains N1.51trn, Biggest Single-day Gain In 2 Years

President Tinubu had on Monday highlighted the need for a unified exchange rate and a reduction in interest rates to drive up investment in the country. Barely hours after Tinubu said “fuel subsidy is gone”, long queues resurfaced across petrol stations in major cities as about 98 percent of petrol stations shut their pumps.

CardinalStone research analysts in their May 30 note said, “We expect the early communication of the mostly pro-market policy direction of the new administration to bring some cheer to equity investors. Notably, potential improvement in FX market liquidity and removal of fuel subsidies could reignite foreign participation in the equities market from its current lows. There is also likely to be a bandwagon effect on the part of locals.

“We scope for a positive re-rating of the Nigerian equities market, which is currently trading at a 19.1percent discount to its 10-year average level despite boasting higher Return on Equity and adjusted dividend yield . In the medium term, overall macro improvements and a benign policy environment could enhance the fundamental values of equities and potentially support target prices”.

In the CardinalStone analysts view, the administration’s preference for a reduction in yields could be actualised by “first effectively combating supply-side drivers of inflation—the primary justification for the current hawkish monetary policy regime. However, resolving these supply-side issues will likely take some time, leaving latitude for high-interest rates in the near term, especially given the government’s borrowing needs vis-à-vis relatively tight liquidity”.

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