Analysts list stock market’s performance-inducing factors for 2019


Photographer: George Osodi/Bloomberg

Seek new reforms to drive sustainable economic growth
Capital market analysts have identified post-election rally, stable global interest rate and the relatively cheap outlook of Nigerian market as critical factors that will boost performance of the nation’s bourse and growth in 2019.

However, they argued that the market is likely to be steered by the fallout of electoral activities and rising global interest rates in the second quarter, which may trigger more sell-off and cause further damage to the entire stock market.

Indeed, the Nigerian equities market did not fare well as expected in the first half of 2018, due to dimness in the services sector, as well as weak consumer spending.

The trend, according to analysts, is expected to trickle down to the second half of the year, even as elections is likely to dominate near-term activities, thereby inducing greater economic uncertainty and distraction in policy formulation and governance.

But for the 2019 financial year, they explained that most of the internal and external risks that propelled the bearish sentiments in second half of 2018 must have fizzled out, giving way for improved corporate earnings and a more stronger economy.

Specifically, the Head of Research and Strategy of Codros Capital Limited, Christian Orajekwe, in a telephone interview with The Guardian, argued that most of the bear-induced risk factors will no longer be visible from first quarter of 2019.

He pointed out that with ample opportunities in the nation’s stock market as being relatively cheap when compared to other emerging markets, the 2019 financial year would witness a reasonable level of rebound and pave way for more investors to access the market.

“There are opportunities in the market for 2019. Most of the external risks will give way one year from now for the economy to become stronger. Those that invest in the H2, 2018 will be in good position to reap god returns.

“The Nigerian market is quite cheaper when compared to other emerging markets. Investors will see Nigeria as the first point of call for investment across the emerging markets,” he said.

The Chief Research Officer of Investdata Consulting Limited, Ambrose Omodion said predictions of market rebound in 2019 is due to improved corporate performance of listed firms especially in the areas of transparency and dividend payout.

He noted that most of the insurance firms that could not pay dividend over the years have bounced back.

“People are optimistic on 2019 rebound because the companies are cheap with high level of transparency in their activities. Their fundamentals are becoming stronger. With the budget signed into law, we would see a stable result by Q3 against the full year 2019 which would ultimately spur market rebound.

“Again, we will have stable economy for the next three years from 2019 and no election activity again that may drag the market down. However, if government fail to initiate new reforms to drive economic growth, we may not see meaningful and sustainable growth,” he said.

The Head of Equities at FBNQuest Capital, Bunmi Asaolu, said: “Our view is that the macro outlook is still supportive, with oil prices remaining firm, and that this should offset potential uncertainty stemming from political risk going into second half of 2018.

“Although we do not expect consensus earnings estimates to see significant upwards revisions through the rest of the year, valuations are yet to fully capture earnings outlook expectations, especially among the tier 1 banks. As such, we expect the index to recover lost ground, with a minimum of 10 per cent gain by the end of the year.

“So, as long as the elections are smooth in 2019, we would expect a stronger 2019 than 2018 for the markets.”

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