Emmanuel OchayiMarket Decline as Trading Week Opens
The Nigerian equity market experienced a downturn on Monday, with more investors on the sell-side. This negative trend caused a 0.09 percent dip, pulling the year-to-date (YtD) return down to 33.28 percent.
The Nigerian Exchange Limited (NGX) All-Share Index (ASI) and Market Capitalisation decreased from the preceding trading day’s 99,743.05 points to 99,656.38 points.
Join our WhatsApp ChannelNew Investment Opportunity: FCMB-TLG Private Debt Fund
On Monday, the Securities and Exchange Commission (SEC) approved the FCMB-TLG Private Debt Fund, which opened for investment.
Sponsored and managed by FCMB Asset Management Limited (FCMBAM) and supported by TLG Capital Investments Limited (TLG Capital) from the United Kingdom, the fund aims to raise N10 billion under Series 1 of its N100 billion programme. This fund is Nigeria’s first Naira-denominated Private Debt Fund.
The Series 1 offer, targeting Qualified Institutional Investors (QIIs) and High Networth Individuals (HNIs), is set to close on Wednesday, July 31, 2024.
Market Analysts’ Perspectives
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Lagos-based Vetiva analysts noted that the equity market remains under pressure as investors seek safety in the fixed income space due to attractive yields.
“Given the strong buy-side reaction we saw in the market last week, we expect to see a reversal in sentiment this week, as investors seek to lock in gains recorded last week,” they said.
Meristem research analysts echoed this sentiment, predicting persistent negative sentiment in the equities market. “We expect increased sell pressures during the week, driven by portfolio rebalancing activities as portfolio managers reassess their positions for the closing half-year period.
Thus, spurring profit-taking on selected stocks that have realized substantial gains,” Meristem analysts stated on Monday.
Potential for Buying Interest
Despite the overall negative outlook, analysts do not foresee a significant outflow from equities due to an upcoming bond auction. They anticipate some buying and bargain-hunting activity. “Overall, we expect selling pressure to outweigh buying interest, dragging the All-Share Index lower this week,” Meristem analysts added.
United Capital research analysts noted that the fixed income market continues to deter broader investments in equities. “Investors are only entertaining opportunistic investments in fundamentally sound stocks and those with recent corporate actions,” they commented.
Long-term Investment Strategies
The observed bargain hunting is expected to continue as some investors prepare for a potential moderation in monetary policy in the second half of 2024, particularly in the third quarter.
This preparation is based on an anticipated high base effect for inflation in June 2024. “Fund managers and investors may continue to adopt an opportunistic investment strategy, trading market volatility and investing in undervalued equities,” United Capital analysts explained.
Focus on Sustainable Investment
The FCMB-TLG Private Debt Fund aims to invest in commercially viable and impact-oriented sectors of the Nigerian economy that align with the United Nations Sustainable Development Goals (SDGs). This approach provides investors with an opportunity to earn competitive risk-adjusted returns.
The Nigerian equity market faces pressure due to increased sell-side activity, with analysts predicting continued caution among investors.
However, opportunities like the FCMB-TLG Private Debt Fund offer a new avenue for investment, potentially balancing the market dynamics.
As the market navigates these changes, investors and fund managers are likely to continue their strategic, opportunistic approaches to maximize returns.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
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