More Analysts Predict 13% Growth for Stock Market

Despite recording a decline of 0.7 per cent in the first month of the year, more capital market and financial analysts  remain optimistic that the Nigerian equities market would close 2012 on positive note.

Analysts from two leading investment  bank and  research firms, FSDH Securities Limited and FBN Capital Limited had before last week predicted  the Nigerian Stock Exchange All-Share Index would grow by  13.3 per cent and 14 per cent respectively in the current year.

Analysts from another investment bank and research firm, Meristem Securities Limited (MSL), last Friday said the index would close 2012 at 23,532.91, representing 13.5 per cent over the 2011 close of 20,730.63.

MSL, which was among the top 10 stockbroking firms that led equities transactions on the floors of the NSE in 2011, noted that their expectation was being driven by  the bullish outlook on the financial service (majorly banks), Nigeria’s  stable foreign exchange market, expected downward trend in  yield on fixed income instruments and anticipated positive  macroeconomic performance.

“Our valuation suggests a robust 2012 return of 22.53 per cent  for the NSE  index, which we believe is justified by the attractive valuations of our coverage companies (which represent 90 per cent of the entire market).However, we are inclined to adopt a conservative outlook. This is informed by the outlook on global economy and the increased possibility that the Nigerian market might witness reduced foreign participation in 2012. We therefore discount our forecast by 40 per cent to arrive at an adjusted 23,532.91 index level,” they said.
The analysts explained that their sectoral returns distribution showed their  upside bias for the financial service sector particularly the banks, given their fundamentals, weight and volatility.

“We expect the sector to dictate and lead market performance in 2012. Our 22 per cent target return is 82 per cent overweight on the financial sector particularly the banks. We will however, subject our forecast and underlying assumptions to testing and review as events in both the economic and financial markets warrants. Our understanding of market performance and returns distribution is that market returns are always skewed towards a short period of time, and this is expected to play out in 2012.

Though we remain watchful on the economic climate
given the increasing level of uncertainties that overshadow 2012, we anticipate a fragile first quarter rally and a much stronger rally in the second half of 2012,” they said.