The Nigerian equity market performance in H1-2020 was a tale of two quarters. Notably, the market tumbled by more than 20.0% in Q1-2020 as FPIs and local investors flew to safety amid the collapse in oil prices and currency adjustments.
Looking ahead, our overall outlook for equities is lukewarm in H2-2020, despite the expansionary monetary policy stance in the global space and the renewed domestic interests pushing stock prices towards pre-pandemic levels.
Although the argument for continued recovery is increasingly compelling from a technical standpoint, we note that weaker company fundamentals heightened by the COVID-19 pandemic, currency movement risks and capital control at the I &E window, are key downside risks that could curtail further recovery.
As a result, we expect the market to remain highly volatile for the rest of the year and ‘short-term gain’ driven. In all, we peg our base case scenario for the YTD performance of the NSE ASI in 2020 at -4.1%. However, we believe these times provide opportunities for long term investors, as stocks that have stood the test of time are still relatively cheap.
UNITED CAPITAL RESEARCH