NSE has potential to attract foreign investors – Analysts

The equities segment of the Nigerian Stock Exchange has higher potential to attract more foreign investments into the country, analysts have said.

The analysts gave this opinion on the back of strong returns recorded in the Nigerian equities market in the last few weeks.

According to them, with the 52-week high recorded by the major market indicators of the equities market, things are indeed looking up.

In their report on Friday, analysts from Meristem Nigeria Limited said that the strong fundamentals recorded by major companies in the second quarter as well had been a major driver of the increased activity in the market in the past month.

They also noted that investor-confidence was gradually returning to the equities market, as seen from the recent positive sentiment displayed by investors.

They said, “Last week, the market broke the consensus analyst estimate on market performance as the index crossed its psychological 24,000 points barrier to hit its 52-week high. The duo of positive investor sentiments and company fundamentals has induced a bullish trend in the Nigerian equity market as the Index recorded the first 11-day straight gain in 2012.

“Having explored the recent rally, we have observed that with the exception of the insurance sector, all sectors reported positive returns on a week-to-date basis, with the agriculture stocks leading the pack with a 7.32 per cent return while the banking sector trailed closely with a 5.92 per cent week-to-date return.”

The analysts explained that there was increased participation by foreign investors in the Nigerian equity market, adding that the situation might remain the same in the next few months.

They  said, “As   sub-Saharan Africa markets continue to remain attractive destination to foreign portfolio managers, the Nigerian equities market presents an attraction with higher potential upsides than its peers at 19.82 per cent Year-to-Date stock market performance.

“Current rally witnessed in the equities market, in our opinion, was occasioned by the return of the foreign portfolio managers who had long been on recess waiting for re-entry at support levels, and these investors took positions in some of the blue-chips companies with attractive fundamentals.”

The President, CIS who confirmed this noted that already, a lot of foreign investors were taking position in the equities market ahead of the expected rise in the equities.

He said, “We are pleased to note that recovery has already commenced in our market and we are sure that this recovery would be sustained. Already, you would notice that we are having a 14-15 per cent year-to-date return in the market.

“All indications point to the fact that we are going to see even more growth in the months ahead, and we can see this from the way that foreign portfolio investors have been faring in the market in the last two years and taking advantage of the undervalued prices of major companies.”