As the year to date-date decline of the Nigerian Stock Exchange (NSE) All-Share Index hit 9.1 per cent on Monday, more opportunities have opened for investors to buy stocks at cheaper prices and enjoy good returns in the future. The persistent decline in the prices of most stocks in recent times have driven equities to one-year low, making them very attractive. While the NSE ASI has depreciated by 9.1 per cent, some other sectoral indicators have recorded worse declines. Also, some stocks have recorded declines that are over 20 per cent, indicating favourable entry opportunity.
According to analysts, investors should take advantage of low prices of stocks that recorded improved performance in the first quarter of 2019, saying they stood the chance of getting good dividend and capital appreciation later part of the year.
For instance, Cement Company of Northern Nigeria Plc, United Bank for Africa Plc, Transcorp Plc, Zenith Bank Plc and GTBank Plc, which reported improved first quarter results have suffered decline in prices.
CCNN has declined by 21 per cent so far, while UBA Plc has shed 22 per cent. Transcorp Plc, Zenith Bank Plc and GTBank Plc are 13 per cent, 14.5 per cent and 10 per cent cheaper respectively.
Before now, Analysts at Afrinvest had said although the downbeat nature of the market had left many domestic investors sceptical and confused over the potential near term upsides, investors should rather take advantage of the current cheaper valuations.
A Professor of Finance & Capital Market, and Head, Banking and Finance Department, Nasarawa State University, Keffi, Prof. Uche Uwaleke, recently urged investors to take advantage of low prices of equities in order to enjoy capital gain when the market rebounds soon. The equities market, which declined by over 17 per cent in 2018, has remained bearish, recording a year-to-date decline of 7.8 per cent as at yesterday. This development has led to significant fall in the prices of many stocks, which is an entry opportunity for investors.
Speaking at the Capital Market Correspondents Association of Nigeria (CAMCAN) quarterly forum, Uwaleke, had called on investors to leverage the low prices of stocks and increase their stake ahead of the expected market rebound.
According to the varsity lecturer, Nigerian stock market price earnings ratio (PE) ranks lower than established PE ratio index of global investment firms, therefore reflecting greater room for growth. He cited factors that would drive the market recovery as from the third quarter, to include the swearing in of the President Muhammadu Buhari and early constitution of cabinet members, lowering Monetary Policy Rate (MPR) by the Monetary Policy Committee (MPC), increase in minimum wage, increase in oil price and continued stability in foreign exchange (FX). He also highlighted the continued moderation in inflation, steady growth in Nigeria’s Gross Domestic Product (GDP), early signing of 2019 budget and implementation, improved growth in the non-oil sector as other factors that would lead to a rebound in the stock market.
He said the CBN’s MPC triggered the market supportive move in March 2019, by bringing down MPR by 50bps, after 33 successive months, to 13.50 per cent from 14 per cent, adding that he sees prospects of further reduction in the MPR soon.
“Lower MPR will free funds for investments or lending to firms for expansion which will improve their earnings and deliver more value to investors. It has a way of attracting investors, opening the market and hedging risks,” he stated.