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Focus to shift from bonds to equities in 2013 – FDC

By NKIRUKA NNOROM

There is likelihood of a possible re-direction of investments from bonds to equities market by investors in the coming year, says Financial Derivatives Company, FDC.

The Managing Director, FDC, Mr Bismarck Rewane, who said in his monthly review of the economy and financial system for November, observed that the re-alignment would be made possible, particularly now that Pension Fund Administrators, PFAs, are gradually developing interest in equities market.

Vanguard recalls that out of about N2.8 trillion pension fund assets, only paltry 12 percent is presently invested in equities, way below the required 25 percent approved by the Pension Commission, Pencom.

Meanwhile, the Nigerian Stock Exchange, NSE, has been in talks with Pencom, to see the possibility of investing up to 50 percent of that Fund in the equity segment of the capital market as part of measures to revive the market.

Rewane noted in the repot that bond yield’s superiority to other asset classes was now a declining function of time, adding that there was no significant change in the asset mix between May and September.

He explained that FGN bond still remained the dominant asset in PFA portfolio, saying “Equity mix of PFA asset was 8.5 percent in May 2012; FGN Bonds was over 50 percent of PFA portfolios in May, Money market securities and Treasury-Bills are other heavily weighted assets.

Expected rotation from bonds to equity is yet to take shape despite improved market performance and falling bond yields. We expect a rotation from bonds into equity in 2013.”

He said that a swatch of corporate bellwethers provided uninspiring results leading to an end of month swing in share prices, adding “Now stocks are awaiting a new catalyst.”

He stated that stocks performance in late October was further clouded by weak growth in topline earnings of highly capitalised companies.


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