…Predict Bright Outlook For Fixed Income Securities
Investment experts at Bancorp Securities Limited, a leading investment research and consulting firm in Nigeria, have projected a bearish sentiment in the nation’s capital market this week based on the prevailing micro and macroeconomic trends in the economy.
The experts, who gave the prediction in the firm’s ‘Weekly Stock Recommendation: May 27- May 31 2024’ circulated to our correspondent on Monday, noted that recent reports on major macroeconomic parameters, including the raising of the Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN) by 150 basis points to 26.25% to maintain a contractionary stance amid high inflation, which reached 33.69% year-over-year in April 2024, as well as the GDP growth by 2.98% in Q1 2024 provided insight into the near-term performance of the domestic economy.
According to the analysts, the apex bank’s decision was influenced by muted policy responses in advanced markets, FX market volatility, and challenges in food production while the growth of the economy.
In their projection on the outlook of the economy for the year, the Bancorp Securities’ experts stated: “We maintain a conservative growth forecast averaging 2.98% for 2024, influenced by ongoing reforms, a challenging business environment, security concerns, exchange rate volatility, declining agricultural sector growth, and external risks.
“Additionally, raising policy rates alone will not adequately address Nigeria’s inflation issues, given the complex interplay between interest rates, inflation, and exchange rates, which have depreciated by 63.47% year-to-date to NGN 1,482.81/$1. Improved collaboration between the CBN and fiscal authorities is recommended to effectively combat inflation”, they added.
Based on the foregoing, the analysts maintained that they “anticipate flattish returns on the domestic bourse, with sporadic slight recovery driven by directional information on select stocks.
“The sustained trade-offs in the equities market are expected to increase interest in fixed income securities with strong fundamentals. Nonetheless, growth stocks with low price advantages are likely to attract capital in the near term”, the investment researchers added.
