2020 is another post-election year in the 21-year history of Nigeria’s democratic journey. Data by Investdata Research for the period shows that performance on the NSE has been mixed over the last five post-election years with the benchmark NSE All-Share index recording positive outing in 2000, 2004 and 2012. In those years, the index grew by 52.90%, 15.91%, and 35.70% respectively, while it closed south in 2008 and 2016, after losing 45.77% and 6.17%. Below is the movement of the NSE index.
At the end of trading activities on Thursday, after the public holidays on Wednesday, to mark the new year, the benchmark NSEASI closed positive, after an initial setback.
It is therefore not out of place to attempt an outlook of the nation’s equity market for the year, even as it remains not only mixed but promising given the array of factors capable of driving positive sentiments. It must, however, be noted that there are factors against, which are daily on the increase, ranging from the unstable global economic stance, arising from the U.S-China trade war which has almost extended to other countries. But then, with the first phase of the agreement signed recently, suggesting that the trade tension could end before the end of the 2020Q2.
We expect that the global rates cut and declining yields would stimulate the global economy and manufacturing sector which in turn will favour equity assets, looking at the oscillating price of oil in the international market. The possibility of a further rate cut by the U.S Feds is high if the Q4 GDP does not beat expectations, or meet forecast, a situation expected to redirect funds to emerging and frontier markets.
With many equities on the NSE grossly undervalued, owing to two years of a prolonged bearish market situation, driven by selloffs on the strength of negative sentiments, weak economic fundamentals and mixed scorecards from listed companies, even going into the New Year.
At a time when regulatory moves and economic reforms policies of the government are yielding results by way of the positive macroeconomic indicators as expected, a situation that will support stock market recovery. This will be driven by a low-interest rate regime in the money market and declining yields in the fixed income market, just as the change in the budget cycle to January-December will enhance effective investment planning by businesses. Early implementation of the 2020 budget will definitely have multiplier effects on the Nigerian economy and market. The ongoing insurance sector recapitalization will strengthen the successful companies, while their stocks and earnings will become stronger.
The increasing funds flow into the real sector will boost economic activities needed to drive GDP growth as expected.
Since the government could reopen the borders in no distant time, considering the Africa free trade agreement.
Despite the spike in the inflation rate, the Purchasing Manager Index of 60.8 points in December, an improvement from November’s 59.3points, a sign that activities in the nation’s manufacturing sector expanded faster in the period. This also will reflect in earnings reports of companies, especially in the final quarter of last year.
The downgrade of Nigeria’s economic outlook, as well as some banks, may force the Central Bank of Nigeria to kick-start another round of banking sector recapitalization this year.
We expect the nation’s economic recovery to continue, and project a GDP growth of between 2.10% and 2.40%.
Meanwhile, below is the movement of Nigeria’s GDP over the past six years:
Based on the above, investors should fix their gaze on blue-chip stocks, especially those in sectors such as banking, consumer goods, services, telecom, industrial goods, as well as oil and gas. This is especially true of those companies that had suffered severe losses, as their earnings are likely to come better than the previous financial year-end, even as they still have strong earnings power, enough to further drive prices in 2020.
The recent oscillating trend may likely continue this year, but the 2019 full-year earnings reporting season will drive valuation and prices in the short-term and calls for proper timing for position-taking and to exit, so as to protect capital.
Investors should plan their trading and investing activities in the New Year by sticking to trade plans, instructions, and rules while taking advantage of low prices and navigating between opportunities and uncertainties in 2020. These, as well as the “10 Golden Stocks to buy in the New Year,” were extensively discussed at our INVEST 2020 Opportunities & Trade Ideas Summit (live class), which are available in the home study packs you can play on phones and laptops.
All things considered, this is the time to effectively combine fundamentals and technical tools for taking decisions by knowing the support and resistance levels for repositioning or exiting any position. The equity market is in phases, you must know the various cycles so as to manage your trading and investment risks.
Also, for stocks that should be on your BUY list in this season as the New Year begins, sign up to INVESTDATA BUY AND SELL signal set up; call for your home study pack and ride with the expected recovery on Nigeria’s stock market and economy to help you invest and trade knowledgeable in this New Year.
You can also access stocks analysed in the INVEST 2020 Opportunities & Trade Ideas summit home study pack, which include stock picks to guide your positioning for the year.
Other comprehensive training materials on stock Trading and Investing for Financial Independence series are available for you to view on your mobile phone, laptop, desktop, and TV sets. Kindly call or send yes to 08032055467, 08028164086 or 08111811223.
Don’t Miss out.
CRO | Investdata Consulting Ltd
Tel: 08028164085, 08032055467