The need to invest in fundamentally justifiable stocks while staying short and liquid has been the focus of conversations centered on Economic prospects and opportunities in 2023 amid elections, political transitioning and drive towards a cashless economy for the Nation.
Speaking at a bi-monthly forum of the Financial Correspondents of Nigeria which came up on Thursday, Experts from the Parthian Group urged investors to take advantage of higher yields and invest in dollar assets – Eurobonds as well as dollar placements bearing in mind that in stocks the rules about diversification still stands
Speaking on the theme of the forum “Assessing Nigeria’s Financial Sector and Outlook for the Economy in 2023”, the duo of Oluwaseun Dosunmu, Head of Investment Research, Parthian Securities and Ronke Akinyemi Head, Global Markets at Parthian Partners advised investors to take advantage of stocks that are fundamentally justifiable, focusing on the top 20 performing Stocks listed on the Nigerian Exchange.
Dosunmu In his presentation, said those with interest in equities market should also focus on; stocks that pay good dividends.
He said the dominance of domestic investors in the Nigerian equities market is a good development because it shields the market from the impacts of funds outflow from emerging markets and global headwinds.
Meanwhile, in her presentation, Mrs. Akinyemi said Investors should look for Public-private partnership opportunities as this is expected to reduce pressure on budget funding, just as there will be debt issuances on the heels of these partnerships and opportunities to invest in these issues.
“Uptick in interest rates is however anticipated in second quater, resulting from a reduced level of liquidity and huge budget deficit
“We expect the market to commence this year with some depression in yield, owing to expected liquidity elevation in first quarter,” she stated.
Generally, the investment expert noted that the market is expected to be largely driven by political transitioning, oil price fluctuations, trade wars, possibility of interest rate hikes by other economies and risk of and on sentiments.
According to her, the Monetary Policy Rate (MPR) is likely to increase and credit conditions may remain tight in Q1-23.
Both experts agreed that there will be increased financial speculation and weakened investors confidence
Earlier, Akinyemi had recalled that after the Q2-2022 selloffs triggered by higher interest rate in the fixed income market, the Nigerian stock market was volatile with many stocks trading at substantial discounts and delivering greater dividend yields than fixed income space.
As such, the stock market created a massive opportunity for bargain hunting from mid Q2 to Q4 2022, pushing the 2022 year-to- (YTD) return to 19.98percent.
On a positive note, she said there was improved growth level as the economy began to recover from the impact of the pandemic.
Nigeria became one of the first sovereigns to access funds from the International Capital Market since the start of the Russian-Ukraine war, when it raised about $1.25billion on a 7-year paper at a yield of 8.375percent. Since issuance in March 2022, the yields on the Nigeria 7-year Eurobon issue has increased by 2.5 percent to 10.9 percent as of 30th June 2022, from the 8.4 percent recorded on 18th March 2022.
She said Non-performing loans are likely to increase among lenders as high borrowing cost might raise default risks. PSB license might erode banks’ Non-Interest revenue
” Regulatory blocks remain a risk for the industry, even as the sector will benefit from improved economic activities
“High borrowing cost to weigh on business profits,” she explained.
About the Parthian Group.
The Parthian Group leverages technology to provide a bouquet of diverse financial services to individuals and institutions , enabling growth at all levels.
The FICAN bimonthly forum is a platform where finance Journalists engage subject matter experts to discuss topical issues, investment, policy implications and the Nigerian economy in general.
