8 February 2013

Nigeria: Analysts Recommend Mixed Portfolio Allocation for Investors

Analysts at FSDH Merchant Bank Limited have advised investors to consider an investment mix that favours a combination of equities, fund placement, treasury bills, bonds and collective investment in 2013.

Specifically, the firm recommended 35 per cent, 10 per cent, 20 per cent, 15 per cent and 20 per cent in that order, for the various classes of assets listed above. The bank said this in its 2013 macroeconomic outlook obtained by THISDAY.

"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. 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," it advised.

Meanwhile, FSDH pointed out that the return on individual stocks would be made up of both capital appreciation and dividend payments.

For the equities, the merchant bank listed the activities to majorly drive the market this year to include strong growth in earnings and prospects for corporate action for 2012 and 2013 from the quoted companies.

"Also, improved liquidity in the market on account of activities of the market makers, downward trend in yields from the fixed income market would lead to migration to the equities market, increase in stock market circuit breaker for quoted equities would continue to boost arbitrage and investment in stocks and forbearance granted indebted stock broking firms by the Federal Government through the Federal Ministry of Finance," FSDH added.

FSDH Research maintained that the internet usage per head in Nigeria at five per cent is very low, even as it urged telecoms operators to develop products to bridge the gap.

"This is where the next level of growth will come from in telecommunications in Nigeria. Furthermore, as we noted earlier, the internet, video conferencing and other complementary products continue to offer opportunities for telecoms operators in the domestic market," it said.

It also predicted that inflation rate would trend downward to a single digit, on account of base effects, even as it forecast an average inflation rate of 8.5 per cent 2013.

According to the bank, "there has been improved confidence from the foreign investors on the prospect of Nigeria's economy and investment - both real and financial. The increase in the foreign investments into the country in the last few years is a demonstration of this improved confidence."

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