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Analysts optimistic despite drop in NSE returns

By on August 17, 2014

Capital market operators and analysts have remained optimistic that 2014 will end on a positive note for the Nigerian Stock Exchange even though its year-to-date return is far below the level it attained in the last two years.

The NSE had made a return of 35 per cent in 2012 and 47 per cent in 2013, with the outlook for this year put at positive at the beginning of the year.

But a turbulent start to 2014 had caused the NSE All Share Index to close the first quarter negative at -6.24 per cent.

Although a rally between April 1 and June 30 the index to close the first half of the year on a positive note with a year-to-date return of +2.79 per cent, there is no indication of such a rally in the third quarter.

Only this week, between Monday and Thursday, the All Share Index shed 1.99 per cent with its year-to-date return declining to 1.02 per cent.

Nevertheless, analysts believe that relatively peaceful elections in Ekiti and Osun states and the potential return of foreign portfolio investors from holiday as well as anticipated positive third quarter results by companies, especially banks, among other things can lift the index significantly before the end of the year.

The analysts and operators, however, hold no hope that the Exchange can match its 2013 performance.

The Chief Executive Officer, Enterprise Stockbrokers, Mr. Rotimi Fakayejo, said, “We have had two major elections – the Ekiti election and the Osun election – and a lot of people expected that by now both states would be in turmoil, but we have had some stability coming from that. So, the perception people have of the next general election would have an impact.

“Also, for now, the foreign portfolio investors are on holiday and we don’t expect any major change until around September when they return from their holiday and help the market to pick up. That is what is giving me the comfort that there is every chance that the market will gain significantly before the end of the year.”

Fakayejo added that the performance of Dangote Cement, which is the most capitalised company on the Exchange, would also determine the performance of the market.

He said, “If Dangote Cement gains additional N20 before the end of the year, which is most likely, it will imply about N340bn. And when you add that to what market capitalisation is today, it will overshoot N14tn once again and the index will be about 43,000 basis points.

“So, Dangote Cement is going to be one of the companies that will pull the wait and Nigerian Breweries is going to get better than it is. Then, we are going to see some adjusments in the banking sector stocks.”

The Chairman, Lead Securities and Investment Limited, Mr. Abimbola Olashore, had said recently that the country remained an investment destination for foreign investors going by their continued dominance of the capital market despite the tapering by the United States Federal Reserve authorities.

On his outlook following the first half of the year, he said, “Given the developments in the first half of 2014, we maintain our prognosis’s for 2014 that the NSE All-Share Index will hit 45,000 points by year end; the market turnover will remain between an average daily range of N2.45bn and N4.5bn.”

At the end of July, the Chief Executive Officer, Lambert Trust and Investment Limited, Mr. David Adonri, had told our correspondent that the index would rise to 45,000 basis points maximum and 40,000 basis points minimum.

On his part, the Managing Director and Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, had said, “Having achieved a cumulative growth of 72 per cent in two years, it is expected that the market performance will slow down.”

 

[Punch]