Investment experts at Bancorp Securities Limited, one of Nigeria’s investment research and consulting services firms, have projected that given the current macroeconomic indices in the nation’s economic space, trading in the Nigerian Exchange this week holds prospect for good returns.
The researchers, in the firm’s ‘Weekly Stock Recommendation for Oct 30th-3rd Nov 2023’ report specifically forecasted: “This current week, we expect the broad market sentiments to remain positive, boosted by enhancing liquidity potential of medium-priced stocks, in which FIDSON, FCMB, NEM and ETRANZACT were recently classified.
“The Financial services sector, is projected to significantly direct the course of the bourse in the current week, however it is projected to return flattish save for stronger directional news in the economy.
“The increasing international prices of crude oil, and its by products, is expected to reasonably improve the earnings of constituent issuers books. The Industrial and Consumer goods sector is expected to return flattish, as it opens up comely entry points for investing interests.”
On the foreign exchange (FX) shortfall currently being faced by the country, the Bancorp Securities’ experts noted that the stifled foreign exchange earnings continued to inhibit the strength of the Naira in the international market.
According to the analysts, the $10 billion inflow expected in coming weeks, may offer some level of buffer, but does not ameliorate the situation when juxtaposed with a commensurate backlog on defaulted forward contracts with international suppliers.
While further noting that illiquidity may inhibit the acceptance of Letters of Credit (LC’s) issued to importers in the near term, the researchers maintained that extensive foreign exchange resource allocation had increased the opportunity cost of manufacturing within the domestic economy, triggering further inflation.
The queried that this quagmire begged the question as to the efficacy of interest rate hikes, whilst trading off stimulating the internal economy, adding that in the coming weeks, monetary policy was expected to serve as fulcrum, and ensuring minimal opportunity costs, amongst these two drivers.
