January 9, 2020/InvestmentOne Teaser
We pose this question to you: What are you waiting for?
Almost all the pointers for an uptick in the Nigerian bourse are green. What has been your reason for staying out of the market? Reasonable returns in the safer Fixed Income Assets? An underlying fear that the market will dip further? Trade war and Brexit uncertainty? Low oil price scare?
Deliberate no further. The best time to buy is now!
A critical look at the aforementioned factors will reveal that the tide is now flowing in a favorable direction for investors who have been skeptical and wary of equity investments.
Following CBN’s restriction on Open Market Operations (OMO), investors have been left with limited asset classes to invest in. Treasury bill rates have continued to drop with the 91-day tenor reaching its 12-month low of 3.5% while that of the 182-day and 364-day tenors closed at 4.9% and 5.2% respectively. With inflation (currently at 11.85%) set to inch higher, dark clouds hover over the bond market as well with yields on the 5yr and 10yr benchmark bond yields currently at 10.29% and 11.15% respectively.
No discerning or rational investor would invest in an asset class that would generate negative real returns!
Another upside for an uptick in the equities market is the fact that over the last two years, the market has sadly lost 32% in value, indicating ideal entry prices for most stocks listed on the Exchange. Notable also is the 7.10x PE ratio of the NSE compared to that of Frontier Markets (10.55x) and Emerging Markets (15.63x). Simply put, the NSE is trading at a discount when compared to its contemporaries. In the same vein, the improved valuations as a result of the recent sell-off should support decent dividend yields as we expect investors to take position for the full year 2019 results to be released in Q1 2020.
Global events which have historically influenced market movements and informed foreign investors decisions appear to have taken a turn for good; whichever way you look at them. Trade talks between the US and China seem to be progressing smoothly, the UK and the EU have a clearer direction for Brexit, no proposed rate hikes by most Central Banks and more recently the tensions in the Middle East, following an attack on Iran by the US, which has had an immediate positive effect on oil price (currently trading at US$68.86/barrel).
Again, what are you waiting for?
Looking Green Already
The market has closed positive in the five trading sessions so far this year; as a result, the equities market is up 6.41% year to date with volume and value traded equally on an upward trajectory. We envisage that this trend may continue especially for a better part of Q1 2020. With PFAs set to commence their inevitable return to the equities market, the uptick may be further sustained given the huge amount of funds yearning to be invested.
Do not be left out. Ride the tide. Take positions now.