Afrinvest West Africa has outlined investment outlook for 2023 and how investors can explore the opportunities and guard against threats expected in the new year.
Speaking on Wednesday, during an investors’ parley, with the theme ‘Soft or Hard Landing,’ in Lagos, the Group Managing Director, Afrinvest West Africa, Ike Chioke, said the event was to engage with clients on the 2023 outlook from the investment perspective.
“Issues around inflationary trend, Coronavirus Disease, commodity prices, Russia and Ukraine war, among others are key considerations in investing in the new year and investors have to be guided to explore opportunities presented by these key events around the world.
“These happenings have made investment experts to come together to look at our own crystal ball from an investment perspective next year. So, this forum is just to engage with clients, asset managers, pension fund managers, mutual fund managers to compare notes on what we do,” he said.
According to Chioke, Afrinvest Consulting manages the investment research unit, and its fixed income, the equities and the digital space experiences, put it in a good position to advise on investment in 2023.
“The interaction is giving us the leverage to tell our clients to be well positioned for the market come 2023.
“We are saying, ‘is it going to be a hard landing, or soft landing?’ In either scenario, investors need to be ready and decide when to enter the market and when to exit,” Chioke stated.
The Chief Business Officer, Optimus by Afrinvest, Mr Ayodeji Ebo, said that high interest rate environment presents opportunities to investors, which may present a negative position to the borrower but means higher returns for the investor.
“We know where interest rate earlier this year, but we see that the gap is reducing. The negative real return on investment is reducing. So, we believe that from the fixed income angle, risk-free investment such as the treasury bills present opportunities,” he stated.
He said such instruments would present higher returns to investors and remain safe because government would not default on its obligation.
“We believe that investors are safe in investing in government instruments and blue chips’ commercial papers. From the equities perspective, there are still a lot of volatilities. So, there is negative relationship between the fixed income and the equities, which is normal. The equities become less attractive when fixed income interest rate is going up and is attractive,” he disclosed.
Ebo said investors could also look at it from a dividend yield perspective, which is the return on investment.
“When you look at the financial performance of the companies, if they sustain last year’s dividend relative to current price, the yield will be close to 15 per cent. So that’s another opportunity investors can explore,” he stated.
Encouraging more people to invest their funds, Ebo noted the reality of inflation, which reduces purchasing power.
“So even if interest or the return you’re getting on your investment is not as much as inflation, doing nothing will make you worse off. By investing, you are likely to reduce the impact of inflation on your savings and investments,” he stated.
The Managing Director, Afrinvest Consulting, Abiodun Keripe, said the goal of the event was to intimate market participants, both buyers and sellers, with some of the trends in 2022 and provide insight and perception about 2023 in terms of how to allocate portfolio, strategise and plan for the investment climate in 2023.
Keripe said that investment decision could be influenced by so many variables; hence, the need for investors to be cautious.
He said that inflation running far ahead of returns should not deter investment.
“Assuming you are able to do investment where you earn between 10 to 20 per cent, it means you have been able to cut down your actual cost of living by 10 per cent. In real terms, your exposure to inflation is moderated by the extra income from investing, which is very important than you just taking inflation 100 per cent, ” he added.
Also speaking, the Chief Investment Officer, Afrinvest Asset Management Limited, Robert Omotunde, said diversifying portfolio from a present perspective is one of the critical strategies investors need, especially in an environment of hyper inflation.
Such move, he said, would enable investors beat inflation and make good returns on investment.
Although there are laws within the country that prevent dollarisation of the economy to avoid putting pressure on the local currency, for investors with dollar inflows, such investment is advisable.
“It makes sense to take advantage of dollar investment opportunities for investors with dollar inflows. There are portfolios or opportunities that you can take in different asset classes,” he said.
According to Omotunde, there is no over-emphasising the point that investors that are going to beat inflation, and get superlative return, need to consider diversification by currency, and United States dollar is a major currency diversification that we preach.
