Nigerian equities ended the year 2012 with an impressive YTD performance of 35.45% gain, recording the best performance since 2008- a strong indication that the Nigerian market has bottomed-out and is set to move into the recovery stage as the key benchmark indices comfortably settled above its 2-years high, precisely hitting a 34-months high at 28,078.81 basis points.
The Nigerian market garnered above 7,000 basis points amid weak and mixed daily average turnover recorded in the year; on the back of strong and positive market sentiments on the part of investors.
This was however achieved with a 70% (approx.) foreign participation as at December 2012; a far cry from the 53% recorded in 2008 – and a source of concern about the dearth of domestic investor stake in the market recovery push.
It is therefore trite knowledge that to effectively build and sustain the market recovery desired, a conscious attempt at adjusting the domestic-foreign investors mix is required. The role of ‘Hot Money’ in the economy, a situation encouraged by the attractive naira devaluation and interest regime on the one side and the illiquidity or lack of a fiscal response to resolving the liquidity drain can only provide a cosmetic relief.
To sustain this positive sentiment, the market must address this twin problem in 2013 with a conscious intervention from the fiscal side.
Without this, series of unenthusiastic trading may hit Nigerian bourse more than what we can imagine on the back of inabilities of quoted companies to live up to market expectation that may arise from poor economic policies as extensive analysis revealed significant anticipatory influence on the outlook recorded in 2012.
The sustainability of the strong optimism witnessed on the bourse in the year 2012 is hinged on stronger commitment to liquidity and stimulation of meaningful economic growth.
The evidence of this is rather glaring in the sectoral analysis and cherry picking that characterised market activity in 2012. The value-for-money approach that dictated the market trend considerably in 2012 led to the exclusion of some stocks as revealed by price and volume analysis – leading to negative investors' sentiments towards these stocks throughout 2012.
Sadly, the prospects for these class of stocks in 2013 appear blurred as investors are anticipated to remain cold towards them while the value-for-money approach continues to dictate the flow of naira votes on the Nigerian bourse.
A cautious approach is strongly advised in trading on the sixty-six (66) stocks listed in the table below:
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