Investment pundits and market analysts expect the stock market to outperform its first half in the second half and still deliver an average of double-digit return to investors in the year.
Nigerian quoted equities had recorded capital gains of N802 billion in the first half of this year, indicating a modest average return of 2.79 per cent over the six-month period.
Here is what some of them had to say when The Nation interviewed them:
1. Group Deputy Managing Director, BGL Plc, Mr. Chibundu Edozie, said the stock market would witness stronger uptick in the second half citing increasing investors’ appetite and expected results of quoted companies.
According to him, while analysts had expected a stronger performance in the first half of the year given similar performance last year, external variables depressed share prices as the market failed to react positively to impressive year-end results and attractive corporate actions by listed companies.
He noted that there were expectations that increasing primary market activities would also lead to positive sentiments for the equity market but these expectations did not play out well, mostly due to key risks to global financial markets in 2014, especially the continuous increase in quantitative easing (QE) tapering in the United States (US).
“The market did not react enough to good year-end results and corporate actions, while primary market activities did not gather steam as expected. However, based on the success of Seplat IPO and listing by Caverton, we are optimistic of improving performance in the second half of the year,” Edozie said.
He expressed optimisms that the market could still make a double-digit return in the second half to override the lull in the first half noting that the expected release of the first half earnings of quoted companies could trigger bullish rally for several stocks.
“Barring any further external shock, we expect the market to close the year with NSE’s index at 46,924.59 points, a return of about 14 per cent for 2014,” Edozie said.
2. Managing Director, GTI Securities, Mr. Tunde Oyekunle, also said the second half would witness major comeback for several stocks, especially in the financial services sector.
According to him, there are indications that second quarter earnings of several companies would be better, prompting investors to take positions in these stocks.
“Generally, we expect a slight improvement in the performance of listed stocks across different sectors. Banking stocks will see slight improvements mainly due to the effect of raising the cash reserve ratio (CRR) of public funds to 75 per cent. While the oil and gas, food & beverages, building materials stocks may have obvious growth in earnings; insurance stocks may post mixed results since some of them are yet to come out of their previous loss positions. We expect conglomerates like Transcorp and UACN to record significant growth in earnings,” Oyekunle said.
3. Managing director, Morgan Capital Group, Mr. Ayoleke Adu said there could be some flight to safety to some established companies as the general election approaches.
“We expect a flight to safety from investors in second half of 2014 particularly to companies with strong dividend histories which perform well in their half-year 2014 reports. The general election will be the major economic event to affect the market in second half 2014. We expect low market activities for the major part of the period with intermittent rallies as third quarter and full year 2014 numbers are released. As investors rebalance their portfolios, caution would prevail in the Nigerian capital market as the unpredictable outcome of the general elections will see investors adopt a wait and see approach to investing in Nigeria until there is clarity regarding the presidency,” Adu said.
Riding on the back of sustained gains in May and June, the stock market had erased the losses in the previous four months and left the investors with some N802 billion in capital gains.
The main value-based indices at the Nigerian Stock Exchange (NSE) showed modest performance. Aggregate market value of all quoted equities closed the first half at a high of N14.028 trillion as against its 2014 opening value of N13.226 trillion. The All Share Index (ASI), the benchmark index that tracks prices of all quoted equities and serves as Nigeria’s country index, rose from the year’s opening index of 41,329.19 points to close first half at 42,482.48 points, representing average return of 2.79 per cent.