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Investment Jitters as General Election Looms

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By Shadrack Nyakoe

A country’s politics can exert significant influence on its income distribution and prosperity hence affecting the activities in a stock market as voters in democratic states elect parties that best represent their personal beliefs and interests.

Election results may affect post-election corporate performance either by influencing a country’s overall economy, like through changes in government spending either through fiscal changes, or company or sector-specific decisions such as changes in the regulatory environment after the new administration has been established.

According to research, returns before elections were significantly higher than abnormal returns after the elections.

“Results have indicated that actual stock returns were significantly higher before elections than after election periods. Also expected returns, as well as the market returns, were significantly higher before elections than after the elections. It is recommended that investors should factor in the election effect when making investment decisions. Specifically, investors should buy stocks after elections and sell them when their returns are high, that is, before elections. It is recommended that the Government should maintain stability after elections as instability brings about drops in stock returns,” read a report by Cytonn.

In the Primary Bond Market, the government issued a new 18-year Infrastructure bond, IFB1/2022/18, whose period of sale runs from 23rd May 2022 to 7th June 2022. Key to note, the bond’s coupon rate will be market-determined.

“We are projecting the y/y inflation rate for May 2022 to fall within the range of 6.7%-7.1% with the key drivers being increasing food and fuel prices,” read part of the report.

 

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