July 14, 2017/InvestmentOne Research
MACRO:
We are confident that the manner of approach of the acting president should help mitigate any potential political risk; this together with the improvements in government earnings and FX situation should continue to support the macro environment and as such be positive for equities in H2.
FIXED INCOME:
While there are expectations that y/y headline inflation would moderate further as the harvest season kicks, we expect the high yield environment to persist as the CBN remains focused on delivering real returns and providing support for the Naira. While this is a positive for the fixed income space, it is a negative for equities.
LIQUIDITY:
The summer holidays may see a lull in FPI flows. However, we believe that the new PFA guidelines would continue to provide support for equities investment. In our opinion, this is a positive for equities.
FOREIGN EXCHANGE (FX):
While oil price volatility remains a concern for the CBN’s ability to maintain FX stability, we expect that growing investor confidence in the I&E window would bring stability and liquidity to the FX markets and see Nigeria retained on the MSCI frontier index. This in our opinion will be positive for equities.
CORPORATE ACTIONS/ EARNINGS:
Given the general belief that the economy will see recovery/ slight growth over the second half of the year, we expect corporate performance to improve y/y across quality names.
In conclusion, our outlook for equities for the remainder of the year is positive given the aforementioned factors.