Analysts Foresee Positive Outlook for Equities in Q2-18

By Dipo Olowookere

Last year, the Nigerian Stock Exchange (NSE) was one of the five top performers, topping equities markets of most major European, Middle Eastern and Asian countries with over 40 percent growth in the year.

This positive sentiment was pushed into 2018 with the All-Share Index (ASI) gaining 16 percent in the first month of the year.

In the second month of 2018, February, the index depreciated by 2.3 percent amid sell-offs recorded during the period and also went down by 4.2 percent in March.

At the end of the first quarter of the year, the ASI has improved by 8.5 percent q/q mainly buoyed by the gains recorded in January as well as growth in the economy.

With the second quarter of the year already started, investors are unsure what lies ahead as more political events unfold.

On Monday, President Muhammadu Buhari announced his intention to seek re-election in 2019, and on that day, the market lost over N200 billion.

It is believed that from the end of this quarter, investors, especially foreign traders, may consider pulling out their investments from the market as politicians begin preparations for next year’s polls, thereby paying less attention to governance and more focus on electioneering campaigns.

For analysts at United Capital Research, in Q1 2018, sentiments will be largely driven by H1-18 earnings scorecards, continued improvement in the broader economy and a lower yield environment.

However, United Capital pointed out that, “We believe there is still room for further upside given that the benchmark index currently trades below our base case return of 12.4 percent for the year.”

It noted that, “Although, rising external reserves ($46.3 billion) and oil prices ($68.5/b) support a stable outlook for FX rate, elevated equity valuation and an earlier than expected political uncertainty may cap further uptrend.”

Concluding, United Capital said, “Nevertheless, primary market issuances, especially the proposed MTN listing (expected to add up to N1.7 trillion {$5.6 billion} to market capitalization) should boost momentum, going into the rest of the year.”