How Bullish/bearish Will 2007 Be?

[tzar]

There's no doubt that 2006 was the yr of d bull. Most equities in the yr gave investors the thrill of their lives.However, the question is , will this trend spill over into 2007?
For me, I think 90% of the equities that did PPs, IPOs and POs have a good chance of recording significant capital growth. I feel this will happen as a result of the effort by these companies to fulfill their promises to d investing public. This will depend on the 1st and 2nd quarter performances of these companies. Generally speaking, the fact that not just a few but several will give rise to a competition to perform. Other companies will definitely want a share in all these. This will lead to a continued bullish trend.
I have to say here that a bullish market can disappear as fast as it appeared. Nonetheless, it can also linger on stubbornly. we the investor must be as shrewd and discerning as possible, so that we can bail out pronto.

[SpecNomics]

Essentially MONEY is like anyone of us, she is searching for are best partner, on her way to him she’ll meet some duds and fads, but she’ll forever seek her destined lover; and only the Fundamentals can point us as investors in his direction, while Technical or Trends help you find the duds and fads.

- Anon.

The NSE Index is overvalued. When compared to other Emerging Market PE Ratios, the NSE Index is much greater according to ARMs Second Half Yearly Economic Report e.g. Emerging Asia i.e. Thailand, Singapore, South Korea, Taiwan, etc have avg. PE Ratio of 10.3, while the NSE Index is 16.5. The main reasons for this are Slow Profitability Growth and Excess Liquidity.

I believe the smartest money in the NSE at the moment should be backing Value Stocks e.g. Comparatively Low PE Ratio, with High Cash Flow to Market Value Ratio, low Market Value to Book Value Ratio. Intuitively these stocks would not be those that just did a PP, IPO or a PO.

I can not deny what excess liquidity can do to Capital Gains, see the Housing Markets worldwide, see the spreads btw traditionally risky assets such as Emerging Market Bonds and traditionally risk free assets such as US Treasuries currently at all time lows. But I will not bet on liquidity sustaining my Capital Gains, since nothing moves faster than cash when it’s losing its hard earned self.

Some of the questions we should ask if these conjectures are true are

1. What are we expecting to fuel Capital Gains in an already Overvalued market i.e. to understand the Money flow in the Nigerian Capital Markets e.g. is that Pension Money rolling into the Stock Markets yet, are Foreigners taking greater interest in our Stock Market?

2. How well will the Nigerian Economy perform in 2007? Are we expecting any increase in demand that’ll bring valuation to more competitive level e.g. increase in profitability to justify current prices?

So, am I BEAR or BULL in 2007!!! Of course I am NEUTRAL and would always attempt to see things in different shades of grey. On that note, I accept the Fundamentals I have pointed out above whole heartedly but I am also very open to Trends that suggest Capital Gains can be had where the Fundamentals do not support it.

[chikejane]

How the Nigerian economy responds to the market fundamentals is still a big paradox. Personally, i have sat and watched over the years as many Nigerian banks declare huge profits when the economy is in decline. Something was (and perhaps still is) obviously wrong. So i read analysis of the Nigerian economy to educate myself but move with the flow.

The banking consolidation have further thrown the economy wide open and i am watching to see how the other countries in the west coast respond to our banking whizkids. My immediate guess is that most of them won't know what they are up against until after 2007. Also the current rise in capital market activities will put companies under great pressure to perform!!! So, investors beware and watch keenly before the bubble burst on you. I think that was my main reason for joining this forum: to be informed at all times.

As an investor, i am quite optimistic about 2007. It is going to be bullish and i expect that the quality of corporate governance will further improve. However, a lot of companies may not sustain and/or meet their promises. Many more will go the way of Cadbury. We should keep ourselves informed as soon as their quartely reports indicate otherwise.

Finally, let's keep sharing ideas. No wo(man) is an island. I am keen to learn from our gurus. So keep posting your thoughts. HAPPY 2007!!!