Nigerian Equities Recorded Highest Returns on Investment in May

By Goddy Egene

The Nigerian equities market fetched investors the highest returns in the month of May, 2016 globally despite the economic headwinds, THISDAY checks have revealed.

The market has been bearish, recording a year-to-date decline of 4.9 per cent as at last Friday. However, the negative trend in the market notwithstanding, investors, who have remained in the Nigerian market wore the broadest smiles in the month of May as the   market returned 10.38 per cent.  The 10.38 per cent recorded by the Nigerian Stock Exchange (NSE) All-Share Index, was the highest monthly appreciation recorded across the globe in the month of May.  The Bombay Stock Exchange 30 Index (India) trailed the NSE with an appreciation of 4.14 per cent. In Africa, the JSE All-Share Index rose by 1.79 per cent in May, while the Ghana Stock Exchange All-Share Index and Nairobi Stock Exchange All-Share Index fell by 3.85 per cent and 2.26 per cent in that order.

The Nigerian market outperformed even developed markets in Europe and America.  In   America, for instance, the Dow Jones Industrial Average recorded a marginal growth of 0.08 per cent, while S & P 500 Index went up by 1.53 per cent. FTSE 100 Index (United Kingdom) fell by 0.18 per cent, while Europe Swiss Market Index appreciated by 3.21 per cent. The CAC 40 Index (France) and DAX Index (Germany) gained 1.73 per cent and 2.23 per cent respectively.  The Shanghai Stock Exchange Composite Index (China) and Hang Seng Index (Hong Kong) went down by 0.74 per cent and 1.20 per cent in that order in the month of May.

Meanwhile, assessing the performance of the Nigerian equities market in May, analysts at FSDH Merchant Bank Research said it was affected by four major factors.

The factors, according to them, included: the decision of the Monetary Policy Committee (MPC) to maintain rates and possible adoption of a flexible exchange rate, the price deregulation at the downstream sector of the petroleum sector, the signing of the budget 2016 by the President Muhammadu Buhari and profit taking as the uncertainty surrounding the economy.

The analysts noted that the possible adoption of a flexible exchange rate policy may boost inflow of foreign portfolio investment into the equity market.

“The equity market still offers opportunity for medium-to-long term investors. We recommend that investors should maintain a medium-to-long term position in the market and reiterate that long-term investors should take long positions in stocks that have strong fundamentals,” they said.

In their asset portfolio allocation recommendation, FSDH favours equities and treasury bills, which they allocated 25 per cent apiece. They allocated 15 per cent to fund placement, 10 per cent to collective investment schemes and five per cent to Real Estate Investment Trust (REIT).