2013: Experts Predict 15.78% Upside Potential in Equities

Analysts at Investment One Financial Services Limited, formerly GT Asset Management Limited, have projected a 15.78 per cent base case return for the Nigerian equities market   in 2013, premised on stable outlook on the financial services (majorly banks) and its bottom-up valuation approach.

In a report made available our correspondent, they stressed that the market may surpass their projection barring any unforeseen circumstances such as slow progress of macroeconomic policy reforms.

The year 2012 was a good one for the Nigerian financial market despite its fragile start following the petroleum subsidy removal protests, security challenges and weak investor confidence. The stock market settled at 28,078.80 points. Decomposed into quarters, the Nigerian Stock Exchange (NSE) All-Share Index or ASI fell by 0.38 per cent in Q1 and grew by 4.59 per cent in Q2. Q3 delivered the best gain of 20.43 per cent just as Q4 also rose by 7.95 per cent.

According to the experts, 'Our expectation is driven by a stable outlook on the financial services (majorly banks), Nigeria's FX position (stable), yield on fixed income instruments (downwards) and anticipated macroeconomic performance (positive).'

In addition, they stated that key regulatory initiatives of the NSE such as the introduction of supplementary market makers, waiver of stamp duties & exemption of Value Added Tax (VAT) on stock market transactions will boost activity and participation in the market.

'This will be complemented by impressive corporate earnings performance led by the banks in 2013. Barring unforeseen circumstances and unanticipated downside shocks which can disrupt our assumptions, we expect the NSE bench mark index to trend between the +30,000 and 34,000 points range in 2013.

In the equities space, the analysts added that the financial services sector is expected to deliver 33.7 per cent return in 2013 just as the Consumer goods and Industrial sector is anticipated to return 10.4 per cent and 16.84 per cent respectively.

'Our top pick, which informs this bullish outlook on the financial service sector, includes United Bank for Africa Plc with the biggest upside potential of 69.9 per cent, FBN Holdings Plc, Access Bank Plc, Zenith Bank Plc and Guaranty Trust Bank Plc. We believe the consumer goods sector will be driven by NASCON Plc, Flour Mills Nigeria Plc and Dangote Flour Mills Plc while Ashaka Cement Plc and Lafarge WAPCO Plc may lead the building sub-sector, 'the experts said.