Tellimer’s Hasnain says Pension fund allocation shift to equities to drive rally|The Nigerian equities market has underperformed investors’ expectations year to date, but some analysts are already forecasting renew interests starting from the first quarter of financial year 2020.
Equities valuations are cheap and local pension fund allocation only needs to shift a little towards equities to drive a rally, Head of Equity Strategy, Hasnain Malik at Tellimer (www.tellimer.com) told MarketForces.
Institutional investors, pension funds for example have shown strong appetite for fixed instrument as bearish trend in the market persists.
Analysts say they foresee portfolio reshuffle as yield nosedive.
Hasnain however stated that Africa’s equity markets still have plenty of challenges but in those markets where interest rates are coming down local liquidity should revisit equities, particularly those with high dividend yields.
Data shows that average stock prices of listed companies have lost significantly in the Nigerian Stock Exchange (www.nse.com.ng).
In spite of the fact that two telecommunication giants were on boarded at the bourse, NSE market cap still hovering at around N13 trillion.
Analysts attribute the wide gap in year-to-date stock performance in the year to weak macroeconomic condition.
Excess liquidity in the fixed income segment is giving way, some analysts estimate further pressure down the line.
Declining yield on financial instrument has been attributed to dovish stance of some central banks across the world, followed with excess liquidity thereby causing rates to be more slippery.
Analysts are now seeing possible investing attraction in the stock market in 2020.
Michael Kolaru, Treasury and Investment associate at Financial Derivative Company believes that investors’ interests will shift towards the stocks market as viable alternative to the fixed income market.
Michael is expecting rates to dip further into single digits.
The analyst added that the CBN will also further try to defend the naira against the dollar currency by building up the external reserves in the wake of expected inflation in the New Year.
Hasnain Malik, Head of Equity Strategy at Tellimer told MarketForces that Nigeria is likely to continue prioritizing currency stability over all else.
He said that means continuing slow growth, pressure on foreign reserves and vulnerability to any disruption to oil output.
“But equity valuations are cheap and local pension fund allocation only needs to shift a little towards equities to drive a rally”, Hasnain said.
According to Hasnain, Africa’s equity markets still have plenty of challenges but in those markets where interest rates are coming down local liquidity should revisit equities, particularly those with high dividend yields.
