Expert Hinges Sustainable Market Rebound To Clarity On Forex Direction

With the dominance of foreign portfolio investors in the nation’s equities market, United Capital Plc has linked sustainable market rebound to federal government’s foreign exchange policy disposition.
The Head, Research, United Capital Plc,  Kayode Tinuoye,  who also called for increased local investors’ participation in the market argued that the uncertainty around foreign exchange has continued to impact on market sentiments. 
He explained that given the  dominance of foreign portfolio investors in the market, which stood at 54 per cent as at November 2015, there are strong indications that the Central Bank of Nigeria’s disposition to foreign investors would be a key driver of equities movement in 2016.
He added that market volatility and sell pressure has been majorly driven by capital flight, noting that there was need for increased local participation to insulate the domestic market from external shocks and currency volatility.
Speaking on sectorial performance outlook for the current financial year, Tinuoye explained that the challenging business environment might constrain company’s dividend payout for full year 2016, especially for the banking sector.
“Given the dominance of foreign portfolio investors in the Nigerian equities market, we believe CBN’s disposition to foreign investors will be a key driver of equities movement in 2016 as uncertainty around Foreign Exchange (FX) continues to impact market sentiments
“The outlook on company performance in 2016 remains feeble hinged on rocky patch and a challenging business environment. For the banks, despite the expected reduction in cost of funds, earnings will be tempered by lower yields on investment securities as well as constraints on lending even as they continue to face degradation in asset quality on the back of exposure to risky sectors,” he said.
At the end of trading yesterday, the Nigerian stock market shed marginal 9.14 absolute points, representing 0.04 per cent decline to close at 24,432.37 points. Similarly, Market Capitalization shed N3.14 billion to close at N8.39 trillion.    
The negative market performance was broadly driven by price depreciation in Nigerian breweries and Guaranty Trust Bank.

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