The Financial Derivatives Company Limited (FDC) has advised bargain hunters and other stock market investors to take advantage of opportunities in banking and fast-moving consumer goods (FCMG) stocks on the Nigerian Stock Exchange (NSE).
The FDC gave this recommendation in its monthly economic publication for June 2012, insisting that the stock market always provided opportunities for profit, regardless of "whether it goes up, down or sideways."
The Lagos-based investment and financial advisory firm stated: "Just because we are waiting for signs of a bottom forming does not mean investors should sit on their hands. The market always provides opportunities to profit, regardless of whether it goes up, down or sideways. Investment opportunities remain in the banking and consumer goods sector."
FDC predicted that the NSE would witness more long-term rally between September and October.
It also argued that "sitting the summer out and letting the dust settle before wading back in is also a strategy that had worked well in the past in similar market condition. Just don't stay out of the pool too long. The bigger-picture data still looks too encouraging to discourage long-term investors.
"How should stocks be priced based on trailing and plausible for-ward-looking earnings? There are two diametrically opposite schools of thought. One which believes stocks were overpriced at the year high experienced in May as a result of investors over-zealous reaction to full year-end 2011 and first quarter 2012 results, while the other market lows of June reflects nothing about the fundamentals and it is even more compelling to invest now."
Commenting on the recent decline of the naira against the dollar, the report attributed the trend to the dividend pay-out by multinational companies in the country.
This it said had led to an increase in their demand for forex for the purpose of repatriating earnings.
It also said that speculators were besieging the forex market to take positions, due to their expectation of a weaker currency as a result of the declining trend in oil prices.
"The divestment of international investors' funds from high yield government securities is increasing the demand for forex .The spread between parallel and official rates has widened to levels last seen in December 2009 and early January 2010. Although still relatively high, nominal interest rates have been on a downward trend; with the monetary policy rate (MPR) unchanged at 12 per cent," it added.