BY KENNETH EZE
The Nigerian financial market has been tipped for a relative calmness and mild growth from Q3, 2021.Cordros Research, in a report released July 3, 2021, titled ‘H2-21 Outlook –Navigating the Uneven Path of Recovery’, expressed the opinion that the dampened appetite for stock witnessed in Q2, 2021 would be short-lived.
In identifying what could rally the stock market, the report observed that investors’ appetite would be buoyed by the “interim dividends that accompany the Q2 earnings season.”
Other factors identified in the report that could lead to positive outlook of the capital market, include, “stock-specific events such as GTB’s implementation of a holding company structure and the likelihood of a second tranche of share buy-back by Dangote Cement.”
In analysing H2, 2020 and Q1, 2021, the firm pointed out that, “After a tumultuous year of extreme volatility, a relative calmness has been restored to the financial market.”
With calmness restored, optimism for growth ranks next. And in projecting into the short-term and mid-term, the report stated that, “Despite the yield retracement in the fixed income (FI) market, we do not think investors should give up on the possibility of a market rally in the second half of the year as we still see scope for positive market performance.
“Our view is underpinned by prospects of improved macroeconomic conditions which will enhance corporate earnings, (and) the possible return of FPIs, who have been net sellers of Nigerian equities thus far.”
On the fixed income market, the reports said yields were already at resistance level, with expectations high that there would be “inflexion in the naira curve.”
The report projected that the fixed income market would be adversely impacted by fiscal policies that would see the government want to manage cost of borrowing, though it would still remain comparatively higher than 2020, year-on-year.
It stated, “In the fixed income market, we believe that yields are at a resistance level, and thus, we expect an inflexion in the naira curve from the second half of the year.
We believe that reduced supply from the government, and deliberate efforts by the government to bring down the overall cost of borrowing, will facilitate a drop in yields, albeit above 2020 levels, in the coming months.”
The report also projected that the method of borrowing to finance the supplementary budget would impact all sectors of the market.
