For investors seeking higher returns in the Nigerian stock market, companies in the insurance subsector, building materials and banking should be considered, said Bismarck Rewane, managing director, Financial Derivatives Company Limited.
He also noted that monetary and fiscal policy; Central Bank of Nigeria (CBN) tightening stance, increased government spending as 2015 elections approach, stronger investor risk appetite, volatility of the naira, continued depletion of foreign reserves, and possibility of further tapering of U.S Fed stimulus are factors that would drive the performance in Nigeria capital market in 2014.
Rewane, who spoke last week at the 2014 investors forum organized by Investment One Financial Services Limited (formerly GTB Asset Management Limited) advised an average investor to put his money in value stocks in these sectors as their potentials will imply higher returns-on-investment (RoI) to shareholders.
Though he is positive in his outlook on Nigerian equities market, Rewane noted that growth in the equities market will be modest in 2014 “as investors may exercise more caution”.
Speaking further at the forum with the topic “2014 –market outlook and investment opportunities in a crucial year” the analyst noted his views that stocks like Nestle, Guinness and other ‘overvalued’ equities will correct this year. “The fact that there will be correction in the market does not mean market would crash,” Rewane added.
“There are opportunities in the stock market. Nigeria capital market is totally interconnected today than in the past …particularly in products and market innovation. What the market should also be doing this year is to further look at more ways for innovation and attract more listings,” he said.
On likely movement of variable in 2014, the analyst simply said: “Oil price could decline from $106 per barrel (pb) to $95 pb in second-half (H2) of 2014. Exchange rate will be stubbornly held at N155 for first-quarter (Q1) before sliding to N160-163 in second-to third quarter (Q2-Q3). Parallel market will correct to N170, while interbank will depreciate to N165. Interest rates will decline in Q2-Q3 by 200 basis points. Minimum wage may be pushed up by 10-15 percent in Q3 2014.”
Also at the investors forum, Ade Bajomo, executive director, market operations & technology, Nigerian Stock Exchange noted that Nigeria stock market is on the road to an emerging market. The NSE currently meets 7 of the 9 criteria for an emerging market.
“Technology will be a game changer. Support for new trading models will become norm. Mobile technology enabled solutions will facilitate financial inclusion. Minimum standards will define competitive baseline for broker-dealer firms,” Bajomo said in his presentation titled “the Nigerian capital market –outlook for 2014”.
