Elevated Economic Factors Propel Stock Market Surge: Expert Insights

 Elevated Economic Factors Propel Stock Market Surge: Expert Insights

Market operators anticipate that as long as economic factors like inflation and high exchange rates persist, share prices will likely maintain their upward trajectory, serving as a barometer of economic health globally.

In an exclusive interview with Nairametrics, market experts highlighted the interconnectedness of the stock market with broader economic indicators such as inflation and exchange rates. They underscored the role of the stock market as a reflection of economic conditions, with rising share prices mirroring the state of the economy amidst elevated inflation and currency devaluation.

The statistics revealed an exceptional performance in the Nigerian stock market, with the All-Share Index gaining 36.56% year to date, defying challenges like elevated inflation, depreciating exchange rates, and security concerns.

Nigeria's inflation rate for December 2023 rose to 28.92%, marking the eleventh consecutive increase since February 2023. The currency, Naira, faced challenges, recording a low of N1,433.89 per dollar, reflecting the ongoing decline in foreign exchange reserves.

Market experts weighed in on the situation. The Managing Director of Crane Securities Limited, Mr. Mike Eze, emphasized the stock market's responsiveness to economic conditions. Investors' increasing attraction to the market due to perceived profitability compared to other options like bonds and deposits contributes to robust demand for equities.

Mallam Kasim Garba Kurfi, Managing Director of APT Securities and Funds Limited, highlighted stocks as a hedge against inflation amid the naira's devaluation. He emphasized the importance of fundamental strength for stocks to withstand inflationary pressures effectively.

Independent shareholder, Mr. Joseph Bamidele, noted the surge in investor interest as they turn to the stock market as a hedge against inflation. However, he cautioned latecomers about the market's tendency to correct itself, leading to potential losses.

Executive Vice Chairman of Hicap Securities Limited, Mr. David Adonri, stressed the potential of the Equities Market as an inflation hedge, provided companies enhance their earnings yield. He urged caution among new investors, recognizing the risks associated with equity exposure.

While the stock market remains an attractive option amidst economic challenges, investors are advised to assess individual companies and risks carefully. Cautious optimism and effective risk management are deemed crucial for navigating the current stock market landscape successfully.