6 February 2013

Nigeria: Experts Place Equities Above Bonds, TBs in 2013 Portfolio Allocation

Investors looking to rake in maximum returns on their investment in 2013 must place equities ahead of treasury bills, bonds, collective investments and fund placements, experts at FSDH Merchant Bank have said.

In their forecast for the financial market in 2013, they advised that equities with expected return of 22.54 per cent should take 35 per cent of investors' portfolio allocation in 2013.

According to them, "In our estimation of the opportunities and challenges of the financial market in the next one year, we are recommending a portfolio allocation of 35 per cent, 10 per cent, 20 per cent, 15 per cent and 20 per cent in favour of equities, fund placement, treasury bills, bonds and collective investment, respectively. Taking into consideration the expected returns from these asset classes, we expect a portfolio return of 17.33 per cent within the next one year, all things being equal."

They added that treasury bills with expected return of 20 per cent should come second with a portfolio allocation of 20 per cent.

The FGN, states and corporate bonds that received huge patronage due to attractive rates in 2012, came third on their list. According to the experts, bonds with expected return of 15 per cent should be given only 10 per cent of investors' portfolio allocation.

Collective investment came fourth with allocation of 20 per cent and expected return of 20.01 per cent.

FSDH also advised investors to consider fund placements with 10 per cent portfolio allocation and expect a return of 11.75 per cent.

They also listed FBN Holdings Plc, Diamond Bank Plc Zenith Bank Plc, Flour Mills Nigeria Plc, Nigerian Breweries Plc, AIICO Insurance Plc, Lafarge WAPCO Plc, UACN Plc, National Salt Company of Nigeria Plc and Dangote Cement Plc to give investors a return of 17.10 per cent, 46.60 per cent, 24 per cent, 20.6 per cent, 13.6 per cent, 23.1 per cent, 18.8 per cent, 26.7 per cent, 26.7 per cent 13.7 per cent returns respectively.

"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 22.54 per cent. Meanwhile, the return on individual stocks is made up of both capital appreciation and dividend payments," they said.

Nigerian equities market had started 2013 on very promising note, fetching investors the best returns globally in the month of January.

The Nigerian Stock Exchange (NSE) All-Share Index rose by 13.4 per cent in January some equities with some equities soaring by over 100 per cent.

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