•Favour healthcare, telcos stocks
By Nkiruka Nnorom
As businesses and the world economy continue to grapple with the impact of the Coronavirus (COVID-19) pandemic, operators in the Nigerian capital market have restated the need for investors to diversify their investment portfolio, spreading their risk across diverse sectors and asset classes.
They have also recommended the healthcare, telecommunication and education sectors among others due to the positive fallout in the sectors in the wake of the pandemic.
So far, the spread of COVID-19 has disrupted activities of world economies, strained global supply chains, hampered manufacturing and industrial production, as well as trade.
Consequently, the International Monetary Fund (IMF) has indicated that the world has been put in a ‘great lockdown’, with global growth in 2020 projected to decline by 3.0 percent and world trade volume growth by -11.0 percent, while Nigerian economy is projected to contract by 3.4 percent this year.
Expectedly, stock markets all over the world have taken a hit from the pandemic as well as the decline in crude oil price with the Nigerian Stock Exchange (NSE) falling 14.6 percent year-to-date (YtD).
The operators, therefore, stated that recessions are associated with increasing inflation and higher bond yields and advised investors to concentrate their portfolio on both dollar and naira assets.
In a report titled: “COVID-19 and Investments: Building a recession proof portfolio”, analysts at United Capital Plc, said: “In the current economic environment, it is important to maintain a medium to long-term perspective when investing. With stock prices at record lows, investing in fundamentally sound stocks with a demonstrated history of consistent revenue growth, cost efficiency, stable profit and consistent dividend payment is essential.
“In addition, investing in sectors that are likely to benefit from the pandemic – healthcare and telecom; banking stocks due to liquidity and defensive stocks such as utilities and consumer essentials can help returns on a portfolio, by creating significant upsides.”
“The most important point is to maintain a diversified portfolio, spreading your risk across diverse sectors and asset classes. Bearing the above in mind, investors can comfortably position their investments and limit their losses, even in the wake of a global recession fuelled by the COVID-19 pandemic,” they said.
Speaking to Vanguard, Mrs. Toyin Sanni, Group CEO, Emerging Africa Capital Group, said investors must re-examine the sectors they are exposed to and re-balance their portfolios accordingly.
“New investors are encouraged to position for the few positive fallouts in the education, technology, indoor-entertainment and health and pharmaceutical industries,” she said.