2018 outlook: Expert predict steady, sustainable stock boom

Pundits in the Nigeria capital market have expressed expectations that the positive performance of the stock market in 2017 would be a dominant feature in 2018.
Their prospects were based on the efforts and initiatives designed by the Nigerian government to reposition the nation’s economy which successfully led to some relief from a deep recession..
They added that those initiatives and policies would definitely yield more positive results, even as more of such economic strategies were expected to come on board with a view to addressing those areas that were still vulnerable to economic imbalances.
Believing the nation’s bourse to be a direct reflection of the Nigeria’s macro-economy and the level of conviction of the investing community about government policies, experts have said that the stock market would feed on the already predicted improved economic stand of the country in the New Year.
Also specific activities by the Nigerian Stock Exchange (NSE) and the Security and Exchange Commission (SEC) as market regulators to improve trading atmosphere, corporate governance and sustain investors’ confidence will also go a long way in 2018.
Analysts at Vetiva have raised the hope of investors, when they stated that the nation’s stock market would further grow by between 15 per cent and 20 per cent in 2018.
In its recently released report titled, ‘Nigeria 2018 Outlook: Acta Non Verba,’ Vetiva research said that the growth would be boosted by stability in the country’s foreign exchange (forex) market in 2017.
“Despite the 2017 equity market rally driven by a partial liberalisation of the country’s exchange rate regime, the Nigerian Stock Exchange remains relatively undervalued.
“Now, favourable external conditions support further growth; bolstered by stability in foreign exchange and energy supply, receding cost- pressure and strengthening consumer demand.
“Amidst this, we project a strong equity market performance in 2018, with an estimated full year return of 15 percent-20 percent (Bear: -10 percent, Bull: 30 percent).”
The Nigerian bourse enjoyed a very good performance in 2017 and chief among the drivers of this surge was the introduction of the ‘Investors & Exporters’ foreign exchange window (I&E window), which revived investors’ confidence and boosted liquidity in the foreign exchange market.
Going forward, continued progress on this front amidst a positive outlook for foreign exchange earnings on the back of stable oil prices and production levels is anticipated.
Supplementing this, recent regulation points towards a more significant role for domestic institutions in the Nigerian market, which would inevitably support demand.
Amidst these, experts hold that an improving economic environment (2017E GDP growth: 0.6%, 2018F GDP growth: 2.0%) would buoy company earnings and risk appetite in the market, especially given the expectation of lower interest rates in 2018.
Continuing, the Vetiva report stated, “We expect this performance to be driven by strong growth across under-valued Tier 2 banking names and continued recovery in the consumer goods sector.

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