Investment analysts at Bancorp Securities Limited, a leading investment research and consulting firm in Nigeria, on Monday predicted that the Nigerian domestic equities market will likely experience volatility this as investors navigate inflationary pressures and potential monetary policy changes from the Central Bank of Nigeria (CBN).
The experts, who made the forecast in the firm’s ‘Weekly Stock Recommendation for Oct 21 to Oct 25, 2024’, released on Monday noted that while seasonal consumer spending may provide short-term support for retail and consumer goods stocks, rising operational costs and weak market breadth could hinder broader market performance.
In view of the outlook of the market for this week, they advised investors “to adopt a selective strategy, focusing on fundamentally strong stocks while remaining cautious of resistance levels and overall market sentiment.”
Specifically, the researchers hinged their predictions on the increasing macroeconomic volatility, as broad-based indicators wobble, amidst an increasing urge to ameliorate poverty.
On the pivotal indices that will determine the course of trading in the local bourse this week, they listed the inflation and monetary policy trends, which the investors may react to.
According to the firm’s experts during trading in the week, sectors like consumer goods could see short-term gains due to increased demand, but long-term prospects may be clouded by higher costs and potential rate hikes.
On Oil production and global market influences, the Bancorp Securities’ analysts pointed out that despite a 7% drop in oil prices, Brent crude stabilizing at around $73.55 per barrel can still support oil-dependent stocks, particularly for companies with strong hedging strategies in place.
This is even as they also foresee a potential recovery in local oil production as some terminals, like Brass and Bonny, have seen production increases, which could improve revenue for local oil companies and support their stock valuations.
However, they predicted that based on the pressures in the global oil market, the uncertainty surrounding demand from China and geopolitical tensions could lead to further fluctuations in oil prices, creating risk for investors in the energy sector.
Giving insight to the outlook in the global oil market in the last quarter of this year, the researchers maintained that the Nigerian equities market in Q4 2024 would likely be influenced by global oil price dynamics and local production challenges.
They predicted that while oil companies may benefit from any price stabilization, the overall uncertainty in the global market may lead to cautious investor sentiment in the local bourse.
