By Adeyemi Adepetun
Vetiva Capital Management Limited has predicted that with the gradual stability being witnessed in the stock market lately, investors should expert recovery by third quarter of 2009.
They (Vetiva Capital) made this prediction in their report for the 2009 outlook of the Nigerian economy and capital market.
It stated that last week, a total of N345bn was recovered in one week by investors as a result of the upward trend.
They stressed that with the fundamentals of the companies listed on the stock exchange, any recovery would be triggered by a restoration and reversal of the current trend of high deposit rates in the money market.
This, they noted, became imperative owing to the fact that the dividend yield forecast of between 10.4 per cent and 13.4 per cent are less attractive than the 19 per cent deposit rates being offered by some deposit money banks.
According to them, \"We believe that the recovery of the market would be driven by two key factors- return of investor confidence and the subsisting high yields in the money market\"
\"A challenge facing the capital market is the attractive returns that are currently available to investors in the money market which is as high as 19 per cent per annum. This is expected to face tightening liquidity in 2009.\"
They however noted that with selling pressures thinning down, some calm will return to the market towards the end of the second quarter of 2009.
Based on this, they said the objective assessment of the capital market performance in 2008 was driven by dividend yield, which was the only contributor to total return, as capital appreciation was practically non-existent.
According to them, as at 2008 year end, only four quoted companies had dividend yield that ranged between 9.02 and 11.76 per cents.
\"In view of the above we expect investors to stay away from the capital market until investor confidence is restored and comparative returns from the money market drops.\" They added.
They however urged all capital market operators, most especially the regulators to work towards the restoration of confidence, in a bid to encourage investors to return to the market. - Guardian