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H2: Analysts predict fixed income attraction for investors

Despite positivity from oil price uptrend, economic recovery, and calm on the Covid front, financial analysts at United Capital expect relatively attractive fixed income instrument to capture investors’ focus in H2-2021.

 

The analysts, who stated this in their Nigeria Economic Outlook H2-2021 tagged ‘Walking a Slippery Slope,’ said: “For equities, our prognosis for the Nigerian stock market in 2021 is a lukewarm, sideways movement in the equities market with a bearish bias.

“We do not expect to see any major negative drag on the equities market in H2-2021. However, we do not see a positive catalyst in the near term. On a balance of factors, we expect developments in the yield environment to outweigh other possible market triggers.”

 

They noted that true to their expectations, albeit surging faster than initially projected, the yield environment reversed higher in H1-2021, setting the tone for financial market performance.

 

“Stop rates at primary market auctions in H1-2021 rose sharply through the auctions due to investors’ demand for higher rates and FG’s huge fiscal deficit financing needs amidst tight liquidity in the financial system before moderating following strong investor demand for bills amidst limited offering by the apex bank.

 

“At the bond markets, the narrative was similar as average yield across the yield curve climbed 617bps YTD to 11.3 per cent as at Jun-2021, from 5.1 per cent at the end of 2020.

 

Conse quently, Nigerian sovereign bonds underperformed peers in emerging markets, as the S&P/FMDQ Nigeria Sovereign Bond index has lost 21.1 per cent YTD, compared to a YTD loss of 2.9 per cent on the JP Morgan EM Government Bond index,” the analysts said.

 

In the equities market they explained that the Nigerian stock market, which kicked off the year with some of the bullish momenta from 2020, gaining 5.3 per cent in Jan- 2021, subsequently reversed as various drags, particularly the yield reversal, weighed on sentiments.

 

“Accordingly, the equity market has slumped 5.9 per cent YTD, closing at 37,907.28 index points at the end of H1- 2021.

Although q/q, the NSE ASI shed 8.7 per cent in Q1-2021, the bleeding has eased somewhat in Q2-2021 as the market has gained 2.8 per cent in 2021

 

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