Why equities market may improve in Q2 —Expert

FINANCIAL experts remain optimistic that there would be uplifts in the capital market considering the global economy trend that would impact on the economy of Nigeria, like other emerging economies.

Despite the negative trend, that the Nigerian Stock Exchange (NSE) began the second quarter with, and the not-so-good first quarter which was characterized by election jitters as well as profit taking, equities investors are still advised to maintain positive stance especially on stock with strong fundamentals.

Last week, during the first seven days of the second quarter, trading was bearish with the benchmark index shedding 4.6 per cent, the highest single week loss since September 2018, as the market recorded loss through the week aside for Friday.

Looking into the prospects of the second quarter, however, Lukman Otunuga, FXTM Research Analyst, believed the global trend would be a major determinant on what to expect, even as there are indications that this quarter would yield positive returns considering the local trend as  the general elections have come and gone, and as investors await positive inclination from the Federal Government as local investors needed a stimulus to boost their confidence.

At the end of last week, analysing the US-China deal, a major global deal that would impact emerging economy, Otunuga noted that investor risk appetite towards stock markets is edging cautiously higher on further optimism that the US and China are closer to agreeing a “very monumental” trade deal.

“The reason the deal is important is not only because Nigeria and China have Naira-Yuan swap deal, but China and Nigeria have a very intricate trade relationship, that is quite symbiotic.

“Nigeria imports a lot of things from China; and China imports some things from Nigeria. So, there is a saying that if China sneezes, Nigeria would catch cold.

“With US President Donald Trump stating that negotiations are ‘rounding the turn’ and Chinese Vice Premier Liu He hailing the ‘new consensus’ achieved recently, confidence is reaching new levels that a trade deal will eventually be signed after many months of protracted negotiations,” he said.

He noted that it was becoming increasingly more concrete and clear that both sides want to secure a deal, given the positive rhetoric from the respective governments, hence optimism is advancing that the outcome of a signed trade deal is moving towards a matter of “when” and not “if”.

This rhetoric, he believed, was highly encouraging for investors and fueling their appetite for riskier assets, which means good news for global stocks, emerging markets and potentially Oil as a consequence of improved risk appetite.

Another global trend to impact on the local economy is Brexit. Otunuga noted at an interactive session with the Nigerian Tribune that if looked at things from the surface, Brexit looks like it may not have impact on Nigeria but when you look deeper into the matter, you will realise that some Foreign Direct Investments (FDIs) from UK actually come to Nigeria. “So if UK ends up crashing out of the European Union (EU), this naturally will negatively impact FDIs from the UK to Nigeria. This is another thing to look out for,” he said.

• 5 uncomfortable issues the church needs to talk about

It is pertinent to note that goepolitical risk factors are major happenings across the globe which has been feeding back into the Nigerian market.

Geopolitical risk factors are major thing happening across the globe and we do have a situation where this negative sentiment is actually feeding back into the Nigerian market,  just as other emerging stock markets.

However in Nigera, the experts believed that where the global conditions start to improve and there’s more clarity, public investors may improve their confidence to jump at the stock market