By Nkiruka Nnorom
FOLLOWING the protracted bearish run in the equities market, Prof. Uche Uwaleke, Head, Banking and Finance Department, Nasarawa State University, Keffi and a professor of Finance and Capital Market, has said that some macro-economic indicators and other external factors indicate that the days of bears are fast coming to an end.
Uwaleke, who spoke as guest lecturer at the Capital Market Correspondent’s Association of Nigeria, CAMCAN, quarterly forum in Lagos, expressed optimism that the stock market would rebound in the third quarter. He said that swearing in of the newly elected president and early constitution of cabinet members, lowering Monetary Policy Rate (MPR) by the Monetary Policy Committee (MPC), increase in minimum wage, increase in oil price and continued stability in foreign exchange (FX) would impact market positively and aid the recovery.
He listed other factors that will drive stock market reversal in third quarter to include, continued moderation in inflation, steady growth in Nigeria’s Gross Domestic Product (GDP), early signing and implementation of 2019 budget, improved growth in the non oil sector amongst others, adding that “all these projections are higher than what we saw in 2018”
He said that the planned introduction of derivative instruments in the market by the Securities and Exchange Commission (SEC), which preparations have reached advanced stage at both SEC and the Nigerian Stock Exchange (NSE), would help investors both foreign and indigenous investors to hedge their investments. “The NSE is really waiting for SEC to finalise the rule for the derivatives to be introduced, it will give investors room to hedge risks”, Uwaleke said.
He said that the CBN’s MPC triggered the market supportive move in March 2019 by bringing down MPR by 50bps, after 33 successive months, to 13.50 percent from 14 percent, adding that he sees prospects of further reduction in the MPR. “Lower MPR will free funds for investments or lending to firms for expansion, which will improve their earnings and deliver more value to investors. It has a way of attracting investors, opening the market and hedging risks”, he stated.
Speaking on some external factors likely to drive market reversal in Q3 2019, Uwaleke listed, crude oil price, declining trend of yield in the US, which will likely bring about capital flow to emerging markets, easing US—China trade tension , and easing Brexit tension, among others.