Analysts Outline Factors that Will Drive Stock Market in 2019

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Goddy Egene

As stakeholders continue to review the performance of the equities market in 2018, market analysts at Afrinvest (W.A) have highlighted four key factors to drive the market in 2019.

The Nigerian stock market declined by 17.8 per cent in 2018.
In a special report, Afrinvest stated that they expect market performance to strengthen in 2019, saying however, that the market would be shaped by four factors.
They are post-election stability, new listings, macroeconomic indicators and corporate earnings.

According to Afrinvest, historically, foreign investors have been the major participants in the Nigerian equities market.
However, in 2018, domestic investors contributed the bulk in terms of market activity due to the exit of foreign investors from the domestic market.

“In 2019, we expect foreign investors to return to the Nigerian market after the conclusion of the elections and as such anticipate an improvement in performance. Furthermore, given current pricing of the market, which we believe is attractive –even more attractive in dollar terms –we expect foreign investors to take advantage of this whilst domestic investors will react accordingly,” the investment banking firm said.

The firm’s analysts added that given the sustained drive to increase product offerings in the market by regulators, coupled with the expected improvement in sentiment, they anticipate some new listings either by way of rights or Initial Public Offering (IPO) in 2019.

“While the only IPO was for Skyway Aviation Handling Company Plc (SAHCO), although there were broad expectations for the listing of MTN Nigeria (MTNN) shares on the Nigerian Stock Exchange; however, this plan was stalled and is now expected in 2019. Given the pedigree of MTNN, which is a subsidiary of the South African company MTN Group and the biggest telecommunications operator in Nigeria, a listing of this magnitude is expected to drive interest and activity in the market, as well as boost market capitalisation,” they said.

On macroeconomic indicators, they said factors including oil prices, external reserves and FX liquidity would remain major considerations for investors in 2019 and the outlook on these indicators remain largely positive and should support market activity.

“FX liquidity which is another factor that investors will keenly consider in deciding to invest in Nigeria, shows no signs of being significantly pressured given the appreciable levels of reserves,” they said.
They said after the conclusion of the elections, investors would place a premium on investment decisions based on fundamental analysis of companies as opposed to speculative trading.

“Hence, we believe that performance of corporates will be a major consideration in 2019. Our expectation for corporates’ performances varies across sectors, with our optimistic expectations tilted towards the Banking sector, especially the Tier-1 players that have historically demonstrated resilience amidst tougher operating conditions.

“We also anticipate improved performances from Consumer Goods companies –as economic conditions improve –and Oil & Gas companies –as earnings are projected to be buoyed by increased oil production and prices,” they said.