Financial analysts at Meristem Research have said that they expect a likely upgrade in reclassification of the Nigerian capital market in 2024 by the two major global indices -MSCI and FTSE Russell.
The analysts stated this in its Meristem 2024 Annual Outlook ‘Setting Sail for Gradual Recovery’
FTSE Russell, a subsidiary of London Stock Exchange Group (LSEG) had downgraded the Nigerian equities market while MSCI Nigeria Indexes had announced plans to reclassify the Nigerian market from frontier markets to standalone markets status in one step coinciding with the February 2024 index review.
Upgrade is grounded in the outlook of the improved macroeconomic fundamentals
The analysts said that the anticipated upgrade is grounded in the outlook of the improved macroeconomic fundamentals as the reasons given for the downgrade are expected to improve.
- “Given the reclassification of the Nigerian index from two major global indices (MSCI and FTSE Russell) in 2023, there is likely to be an upgrade in 2024.
- This anticipated upgrade is grounded in the outlook of improved macroeconomic fundamentals as the reasons given for the downgrade are expected to improve.
- Specifically, we expect a likely reclassification from the FTSE Russell during its annual review in September 2024,” the analysts said.
Positive impact on investors’ sentiment
Anticipating a gradual business recovery and improvement in economic growth in 2024, the analysts said they foresee a positive impact on investors’ sentiment, driving the search for value in the equities market.
- “While concerns linger around macroeconomic variables such as inflation, exchange rates, and potential monetary policy hikes, we believe the market will maintain its positive outlook,” they said.
They noted that in 2024 they anticipate a concentration of corporate actions and new listings, focusing on the oil and gas and banking sectors.
Dangote Refinery and selected government entities
They said that the potential, listing of Dangote refinery and selected government entities is expected to drive substantial market activity, attract both domestic and foreign investors seeking opportunities, and create a positive ripple across the oil and gas sector.
Banking sector
In the banking sector, they expect the proposed recapitalization of banks to increase equity raises through right issues and potential mergers as banks seek to strengthen their capital base.
According to them, this should act as an incentive to investors, resulting in spur buying activities across tickers in the banking sector.
What you should know
Nairametrics reported that the Securities and Exchange Commission (SEC) attributed the reclassifications of Nigerian securities indices by FTSE-Russell and MSCI to the present foreign exchange liquidity challenges and their effects on investor confidence.
- Lamido Yuguda, Chairman of the CMC, and Director General, Securities and Exchange Commission, Nigeria stated this at the post-Capital Market Committee (CMC) press briefing in Lagos.
- FTSE Russell, a subsidiary of London Stock Exchange Group (LSEG) recently downgraded the Nigerian equities market while MSCI Nigeria Indexes had announced plans to reclassify the Nigerian market from frontier markets to standalone markets status in one step coinciding with the February 2024 index review.
- “We noted with concerns around the recent reclassifications of Nigerian securities indices by FTSE-Russell and MSCI, attributing these to the present foreign exchange liquidity challenges, and its effects on investor confidence,” he said.
