By Ademola Alawiye

Monday, 6 Dec 2010

Financial analysts have urged investors to maintain medium to long-term investment perspectives in stocks with good fundamentals.

Analysts, who spoke with our correspondent on Saturday, said that there were select opportunities in the banking, building materials, food and beverages and conglomerates subsectors of the market.

The Managing Director, Nixon Securities Limited, Mr. Eric Nicholas, said that a large number of investors lacked basic knowledge of speculative investments.

Nicholas said, ”Most investors, especially local investors, lack the basic knowledge of when to invest and exit from the market. Rather than investing based on speculations, there are stocks with good essentials that investors can get good profit from in the long term.”

He added, ”Speculative strategies usually have a short-time frame, like stock market timing strategies. This can be as short as minutes to days. However, the best investment strategies in the capital market normally operate over a much longer time frame.”

Analysts at First Security Discount House, in their Weekly Nigerian Capital and Money Market Report, said, ”We encourage investors to maintain medium to long- term investment horizon in stocks with excellent fundamentals, instead of investing for speculations.

”We maintain that the current high yields on government securities will continue to encourage the allocation of funds to the money market segment of the financial market at the expense of the equities market, causing the market to trend down.”

On the outlook for money and fixed income markets, they pointed out that the positive outlook of oil price and the improved outlook on oil production were good indicators for improved foreign exchange inflows into the economy.

The report said, ”We expect maturities worth about N110bn to hit the system soon. Also, about N115bn worth of treasury bill is expected to be auctioned next week, which will have a nil effect on the maturities that will hit the system.

”However, about N200bn statutory allocation for the month of December is also expected to hit the system as well as about N75bn government-approved injection for small and medium scale enterprises. This will bring the total net injection in the system to about N270bn next week. Consequently, there will be enough liquid and inter-bank rates will dip from their current levels.”

Cumulatively, there was a net total outflow of N92.52bn from the money market through the government securities and the foreign exchange market during the week.

Source: Punch