Peter Egwuatu and Michael Eboh
15 October 2008
Stock brokers have expressed lack of confidence in the speculated N600 billion bailout plans by some banks to resolve the lingering stock market down turn
Reacting to the speculated bailout plans by the NSE and some banks to inject N600 billion into the capital market to address the perceived lack of liquidity in the market, thereby saving the market from collapse, stockbrokers disclosed that the market meltdown was not solely a liquidity issue and that the bailout plans if any is not likely to have any effect on the market downturn.
According to a stockbroker and Managing Director of Dependable Securities Limited, Mr. Chinenyem Anyanwu, the bailout would not really cause a reversal in the current trend in the market, unless the major issue, which is investors' apathy is addressed.
He further stated that the bailout arrangements may not see the light of day as it may not get the approval of the regulatory authorities - the Securities and Exchange Commission (SEC) and the Central Bank of Nigerian among others.
"The bailout plan would only benefit the market a little, in the sense that it would only bring about liquidity. My major concern is that what is pushing down the market is not only liquidity. Liquidity is only an aspect. The major issue is apathy, people are afraid to buy, banks are afraid to lend. So that apathy should be overcome, people should be made to understand that it is the way of all global stock markets, that all stocks market have a period of rising and falling. That is the market is going to overcome the current downturn," he said.
He called on the operators and regulators of the capital market to undertake a sensitisation campaign, informing Nigerians on the peculiarities of stock exchanges around the world, assuring the investors that sanity have returned to the market.
"There are fears on the part of investors and everybody. The fear has to do with if the market has bottomed up, that is, if they put in their money, if it would not be eroded. I have not marketed for some time now, because a client may ask you if you are sure that the stock you are asking them to buy is not going to fall further, and you say yes, if it later falls, what will you now tell the investor, will you go back to the investor tomorrow again.
The issue is that the whole thing is so uncertain, we need a tightening up. The market fundamentals are goods, the Earning Per Share (EPS) and Price Earnings (PE) ratio are good, then why is it still falling? People needed to be assured. The issue is not all about liquidity there is need for psychological boost. People needed to be told that this market had already bottomed out and is on its way up."
Also speaking, Mr. Osita Odili of MBL Financial Services Limited, commended the authorities for their commitment in ensuring the survival and sustainability of the market, despite the fact that the bailout plans are coming a bit late.
He, however, disclosed that the bailout will not have any positive effect on the market in the short term and is likely not to have any impact at all, in the long run, if investors' confidence is not restored.
"The bailout is good, but I do not see it having any effect in the market in the next three to six months. This is because of the fact that the confidence of investors and many other people have been reduced. A lot have to be done in this regard if the bailout would eventually work. It will be a case of so much money in the capital market and very few people to utilise these funds."
Mr. Chidi Ajegbu, Chief Executive Officer of Mutual Alliance Investment and Securities Limited, corroborated the views of the other analysts, stating that the bailout will rally the market a bit in the medium to long term but will not help in fully restoring the confidence of investors. He noted that the effect of the bailout would be totally felt in the long run, when the a number of factors would have helped in fully restoring confidence in the market.
"The bailout will rally the market a bit, but I think it will do so in quite a couple of months. The rally will be gradual, as some foreign investors will now channel their funds to the Nigerian capital market, hoping to cash in on the expected rebound, thereby, further buoying activities in the market," he further stated.
Meanwhile, the Nigerian Stock Exchange (NSE), has disowned the speculated N600 billion intervention bailout plans to safeguard the stock market from its lingering downturn.
The spokesperson of the NSE, Mr. Sola Oni confirmed to Vanguard that the Council of the Exchange did not take any decision to inject N600 billion into the stock market, adding that reports in the media (not Vanguard) was sheer speculation.
"The Council of the NSE did not reach any agreement with any banks to inject money into the market. The news we read from some newspapers about injection of funds into the market is mere speculation. However, the Exchange has been having discussion with some banks on how to find solution to the lingering falling prices of stocks.
Meanwhile, the Director General of the NSE, Professor Ndi Okereke Onyiuke had earlier said that it will collaborate with the Securities and Exchange Commission (SEC) to see what measures can be taken to find a lasting solution to the falling share prices in the stock market.
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