With a background projection that, the bullish momentum in the Nigerian equities market will be sustained in 2018 albeit, at a moderating pace. We advise investors to consider the following as they make equity investment decisions in 2018.
Firstly, the outlook for 2018 favors pro-cyclical sector/stocks, by implication, we recommend investing in pro-cyclical sectors/stocks. Accordingly, consumer and industrial goods names, which should benefit from improved consumption spending, present attractive opportunities. Also, banking stocks will come very handy given the improved outlook for asset quality, earnings stability, dividend consistency, and stock market liquidity.
Additionally, we advise overweighting equities in H1-18 and underweighting in H2-18 due to imminent political uncertainties and impact of risks associated with the build-up to the forthcoming 2019 elections. However, we advise investors not to get derailed by potential volatility in H2-18. I n principle, the potential change in market dynamics between H1-18 and H2-18 is an avenue for a strategic entry into equities for investors with a long-term horizon. To this end, our recommendation for risk loving, patient and alpha seeking investors is to “sell the rally in H1-18 and buy the dip in H2-18”. Put differently, rather than outrightly avoiding equities in H2-18, discerning investors can buy low in H2-18 and wait for a rebound to sell higher.