The macroeconomic developments in Nigeria and initiatives in the financial system, specifically in the equities market should further drive the equities performance in fourth quarter (Q4) of 2012, with the exchange's benchmark index likely to close the year at 32.05 per cent or 27,375.19 points, financial analysts have said.
The analysts from FSDH Securities Limited stressed that their expectation was premised on the fact that most companies results released up till date had shown improvement with wide margins against previous years.
They, however, warned that there were some challenges which might adversely impact the market.
"We are of the opinion that the equities market will close year 2012 remarkably better than it recorded in the last five years. We think the NSE ASI has the capacity to achieve a growth rate of 25.46 per cent in the second half of the year. This will lead to a growth rate of 32.05 per cent for the year 2012. Thus, our forecast for NSE ASI is 32.05 per cent to end the year 2012 and this will generate NSE ASI of 27,375.19 points," the experts said in their review of the nation's economy and the financial markets.
On investors' ideal portfolio allocation for the rest of the year, they recommended a portfolio allocation of 30 per cent in favour of equities.
They said: "In our 'Economic & Financial Market: Review and Outlook for 2012', we presented an equities portfolio model based on one year investment horizon and with an expected return of 18.21 per cent. "Events in Q3, has necessitated a review of the equities portfolio strategies. Following our review and expectations of the financial market in the next one year, we are inclined to review our portfolio structure.
"We are recommending a portfolio allocation of 30 per cent, 10 per cent, 20 per cent, 20 per cent and 20 per cent in favour of equities, fund placement, treasury bills, mutual funds and bonds, respectively. Taking into consideration the expected returns from these asset classes, we expect a portfolio return of 16.17 per cent within the next one year, all things being equal. An equity portfolio that invests in our carefully selected stocks, following the fund allocation and abiding by both entry and exit prices, should be able to record a return of 19.88 per cent. Meanwhile, the return on individual stocks is made up of capital appreciation and dividend payments."