Founder of The Analyst Brief, Oyinkansola Aregbesola, says the recent FTSE classification of selected Nigerian stocks is expected to increase investor optimism and buying interest in the equities market.
Speaking during an interview with ARISE News on Friday, Aregbesola said investors had been anticipating the classification after it was previously suspended over concerns surrounding the T+1 settlement system and foreign portfolio investors’ pre-funding requirements.
“What that means for us is that all these stocks that they have listed under the T+1 stocks, we’re expecting increased investor optimism and buying interest surrounding those stocks and overall, in the Nigerian equities market.”
She said the development could also encourage the return of foreign portfolio investors, whose participation in the Nigerian stock market has declined in recent years.
“So we’re expecting the return of FPIs because what we’ve seen in the past is a decline in foreign participation in the Nigerian stock market. On average, the five-year average is around 17 percent, so we’re expecting that to increase going forward.”
Aregbesola said positive market sentiment and improving macroeconomic conditions were also supporting expectations for stronger participation in the equities market.
“For the Nigerian equities market, there’s high sentiment. The sentiment generally is positive, with improving macros the PFA, new allocations for the PFA and other factors surrounding the market.”
She stressed that the classification of 31 stocks would not mean other stocks would be ignored, noting that domestic participation remains a major driver of the Nigerian equities market.
“The fact that we have just 31 stocks in a basket does not mean that the remaining stocks will be ignored.”
Aregbesola also said the expected release of nine-month earnings could further improve investor participation as investors position themselves ahead of companies they expect to outperform the market.
“We’re still very much expecting nine-month earnings. Anytime there are earnings results, there’s always that positive participation in the market.”
Goodness Anunobi