Coming from a negative return of 6.2 percent the Nigerian stock market recorded in the first-quarter (Q1) of 2014, investment analysts are of the view that the market will achieve a positive return in Q2.
Despite that, the Nigerian equities market closed last week with negative return of 5.43 percent year-to-date (ytd), but market analysts still believe that “Q2 looks more positive.”
As Q1 results of most companies drop at the stock market, analysts expect that the positive financial report of many listed companies will improve market sentiments and drive the market indicators upwards in the weeks ahead.
Though there are opportunities in the stock market as Nigeria’s equities market now trades at attractive multiples relative to most continental peers, not a few market analysts have noted the possible impact of any increase in buying by foreign investors.
Foreign investors still, on average, dictate the tone of demand for equities in Nigeria. More so, the positive outlook trailing equities is justifiable because these offshore investors have justifiable reasons to increase allocation to major emerging markets on valuation grounds.
Performance indicators at the Nigerian stock market have been depressing and continued to reflect on all sectoral indexes, which remained in negative territory still last weekend.
For instance, the NSE-30, which measures the performance of 30 largely capitalised stocks recorded -7.63 percent year-to-date (ytd) return; NSE Banking Index (-12.34%); NSE Insurance Index (-10.17%); NSE Consumer Goods Index (-10.23%); NSE Oil/Gas Index (-7.41%); NSE Lotus II Index (-1.88%); NSE Industrial Goods Index (-1.26%), and NSE ASeM Index (-1.03%).
Amid all these, analysts still believe that increased government spending in the run up to 2015 election will bolster liquidity into the Nigerian stock market. Investment analysts also believe that as the stock market is in bear territory, value investors will target perceived undervalued stock to hunt for good bargains.
While Edward Kingston Associates expects the movement in the equities market to remain choppy in Q2, investment analysts at CBO Capital say the success of Seplat’s listing on the Exchange will open the door for other upstream oil and gas companies, and will create an opportunity for investors to partake in value creation in these companies.
Partnership Investment Company analysts are also optimistic, saying “we anticipate that the lows which some equities have reached, provide new entry level for bargain investors and this affirms our expectation that the market will do better in Q2. We also expect improvements in the political situation by the end of the first quarter of 2015.”
Abdulmuttalib Garba, associate, investment research, Dunn Loren Merrifield, notes that “we see another round of market rally in the months ahead. Although the pick-up may not be as high as that witnessed in 2013, we are of the opinion that the NSE ASI will settle above the 40,000 point mark in the course of the financial year. Our anticipation is that the strong performance expected from major companies across some sectors would serve as a catalyst for the market rally.”
Iheanyi Nwachukwu
