Expert optimistic of market rebound, lists growth factors
A Professor of Finance and Capital Market, and Head of Banking and Finance Department, Nasarawa State University, Keffi, Uche Joe Uwaleke, has expressed optimism that the stock market would record significant recovery by the third quarter (Q3) of this year.
The capital market expert, who spoke in an interactive session with journalists in Lagos, at the weekend, identified peaceful inauguration and quick constitution of cabinet, as well as release of half-year result as major factors that would spur the market rebound.
According to him, the country’s market PE ratio ranks lower than established PE ratio index of other global investment companies, thereby creating more opportunities for growth.Therefore, he stressed the need for investors to take advantage of prevailing low equities pricing to boost their investments to enable them position properly for the expected market upturn by end of second quarter.
Speaking on the theme “Stock market in the first quarter 2019 and post-election prospects”, he said that that the Nigerian capital market, which ranked as the world’s third most rewarding market in 2017, after Turkey and Argentina, and subsequently turned bearish, was poised to enter into another bullish era.
He also listed other factors that will drive stock market’s reversal in third quarter to include, 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 amongst others, adding that “all these projections are higher than what we saw in 2018.”
The don said that the planned introduction of derivative instruments in the market by the Securities and Exchange Commission (SEC), of which preparations have advanced, would attract more foreign investors to the market as the product would help investors to hedge their investments risks.
“The NSE is really waiting for SEC to finalise the rule for the derivatives to be introduced, it will give investors room to hedge risks”, Uwaleke said. He said that 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.
According to him, the expected listing of MTN on the NSE, will boost market liquidity and diversify product offerings in the stock market.He also noted that the Nigerian Pension Commission (PENCOM)’s six multi-fund structure rule is expected to boost PENCOM’s investment in the equity market in a near future.
Speaking on how minimum wage increase will impact positively on the market, he said: “This is the time to take position, the minimum wage will be positive for the capital market, inflation is caused by weak aggregate demand, but new minimum wage will rather boost aggregate demand, driven by greater number of people having more disposable income and also money to save.”