Entering 2019, the biggest concern for investors was that the market could fall further, given that most of the challenging factors that beclouded market performance in 2018 were expected to persist over 2019.
However, just as we stated in our outlook report for 2019, there is a better balance of risk for the market; on the domestic macro scene, GDP numbers in 2018 fell short of expectations, meaning that the bar to beat in 2019 has been adjusted lower. Besides, the risk of US rate hikes and dollar strength – which were major pain points in 2018 – looks more subdued this year, considering the Fed’s recent dovish language.
Added to this, 2018’s sell-off sent the gap in valuations between stocks in developed and developing countries back to near-record levels. The P/E ratio for Nigerian equities (9.2x) are currently significantly below their 5-year long-term average (13.0x) and are trading at a very sharp discount to equities in the rest of the world.
Thus, the market clearly looks attractively valued, offering an interesting entry-point to a multi-year recovery story.
In line with the above, the market has recorded a YTD return of 1.1%, driven by renewed investor interest in the wake of upcoming elections and on the backdrop of better dynamics in the global space (US Fed dovishness).
United Capital Research