Wachira Kang'aru And Agencies
28 August 2008
Nairobi — The Nigerian Stock Exchange has announced sweeping changes in an attempt to slow down price meltdown triggered by panic sell as banks start to recall loans secured by shares.
Since March, the NSE All-Share Index has fallen by more than third to hit its 12-month low.
However, market experts warn that government intervention could scare away international investors and damage market operations.
"Our view is that these measures will negatively impact international investor confidence in the equity market and could negatively impact equity market liquidity," said an investor alert by JPMorgan, an international investment firm, highlights.
On Tuesday, Nigeria's Finance minister, Shamsuddeen Usman, said the changes were meant to stabilise the falling market.
With the new changes, listed companies are allowed to buy back up to 20 per cent of their own shares and cap daily fall share price to maximum of one per cent to curb volatility.
In Kenya, this has been capped at 10 per cent while no rules exist on share buy back.
The minister also gave the central bank power to take "appropriate measures" to improve liquidity in the system if needed.
"In our view, the increasing intervention of government in the stock market to provide stabilisation will concern international investors," JPMorgan added.
Slash fees
The banks were also requested to allow longer repayment periods for credit extended to licensed brokers and investors.
This, too, JPMorgan says could trigger panic and "suspicion around the extent and vulnerability of bank exposures to market losses."
To improve liquidity, the Securities and Exchange Commission, the Nigerian Stock Exchange and brokers agreed to slash all fees and commission by half.
Brokers said that the decline was due to investors selling shares to buy into a slew of private placements.
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