Nigeria stocks' bullish trend remains intact

The Nigerian equities market has shown significant bullish momentum, with a 0.77% increase pushing the year-to-date return to an impressive 22.9%. Currently standing at over 33,000 basis points, the market has recorded yet another New Year high. Oluwaseun Adesoye, the Managing Director at Associated Asset Managers, provided valuable insights into the market dynamics in a recent interview on CNBC Africa. Adesoye highlighted the resilience of the market, attributing its sustained rally to several factors. One key driver has been the Central Bank of Nigeria's policy initiatives, particularly the introduction of the Investors and Exporters window. This initiative has instilled confidence in foreign investors by ensuring the stability of currency valuations, thus attracting more capital inflows into the market. Despite concerns about the delayed approval of the 2017 budget and the appropriation cuts affecting crucial projects, Adesoye remains optimistic about the market's performance. He emphasized that the rally is primarily valuation-driven, citing favorable comparisons with other frontier markets. While some analysts have raised concerns about overvaluation and potential profit-taking, Adesoye believes that the market still presents attractive opportunities for foreign investors. The banking sector has been a major driver of the market rally, with tier one banks leading the charge. The resilience of financial services and consumer goods stocks has been notable, with companies successfully navigating challenges such as foreign exchange fluctuations and pricing pressures. Adesoye highlighted the upcoming half-year results as a potential catalyst for further market activity as investors position themselves strategically. Looking ahead, Adesoye expressed confidence in the market's ability to overcome macroeconomic challenges and deliver strong performance in the coming months. He emphasized the importance of staying vigilant, particularly in sectors like oil and gas, where volatility and external factors could influence trading patterns. One potential game-changer for the market could be the listing of distribution companies (discos) on the Nigerian stock exchange. While this move could enhance market depth and liquidity in the long run, Adesoye cautioned that the immediate impact might be limited if underlying operational issues persist. As liquidity continues to improve, Adesoye suggested that companies consider capital raising opportunities to capitalize on investor appetite. While there may be mixed sentiments regarding new listings, Adesoye believes that testing the market could yield favorable results, especially in a climate of growing investor confidence. In terms of stock performance to watch, Adesoye highlighted the first-tier banks and industrial goods sector as key areas of interest. He underscored the significance of macroeconomic developments in shaping stock performance and advised investors to monitor factors like budget approvals and regulatory changes closely. As the Nigerian equities market maintains its upward trajectory, investors are poised for an eventful and potentially lucrative period. With a strong foundation and optimistic outlook, the market's bullish trend appears set to continue, offering opportunities for both domestic and foreign investors.