Michael Eboh
15 October 2008
Experts in the Nigerian capital market have called on operators and regulators in the market to work towards restoring investors' confidence in the capital market, disclosing that restoration of investors' confidence will cause a turnaround in the current downturn that has bedeviled the market in the last couple of months.
Speaking in separate interviews, the experts disclosed that injecting funds in the market is not likely to address the situation, as the major factor responsible for the continuous decline is loss of confidence and not lack of liquidity as stated in some quarters.
According to the Vice-President, Equities Securities Limited, Mr. Daniel Ugwuoke, the injection of funds into the market will not really provide the solutions to the market meltdown, adding that programmes should be put in place to make people want to keep their shares.
He said, "The move to inject funds into the market would not have a significant impact on the market, as investors would still continue to sell off their shares. If the major issue of restoring investors' confidence is not addressed, people would still dispose of their shares and this would make the market decline further."
Also speaking, the Chief Executive Officer of Financial Derivatives Limited, Mr. Bismarck Rewane, said injection of funds into the market would not completely address the situation, adding that N600 billion is not enough to salvage the situation going by the amount that has been lost by quoted companies since the beginning of the decline in March 2008.
He said, "The move to inject fresh funds is not enough to completely turn the market around, because so many things contributed to the decline, but all the same, it is a step in the right direction"
The Executive Director, Economic Associates, Dr. Ayo Teriba, disclosed that the problem with the market is not lack of liquidity, but over-issuance and loss of confidence on the part of investors.
"We do not have a problem of credit deterioration due to falling prices. If market leaders want to shore up value, let them go ahead. Over-issuance is causing the decline, and the government cannot intervene for now. The decline in Nigeria is very minimal, compared to what is currently happening all over the world. If investors' confidence in the market is restored and the interest rates come down significantly, the market will recover."
Unfortunately, investors are being excluded from the numerous meetings aimed at finding lasting solutions to the crisis. It is a known fact that investors' confidence has hit an all-time low, and will take a great effort by the regulators and operators to restore the confidence of investors in the market.
According to a report on the website of a Cowry Asset Management Limited, last week, "Year-to-date, the market has experienced a 23.02 per cent descent. News of SEC, NSE and the banks' dissociation from rumours of an imminent intervention further doused optimism among wary investors. Not even the capital market decline recorded 1998, caused due to the apprehension of investors of a smooth transition from military to civilian government in Nigeria and in 2004, due to recapitalisation of Nigerian banks, were this bad."
According to a stockbroker and Managing Director of Dependable Securities Limited, Mr. Chinenyem Anyanwu, the bail-out would not really cause a reversal in the current trend in the market, unless the major issue, which is investors' apathy is addressed.
"The bail-out 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 stock markets have a period of rising and falling. That is the market is going to overcome the current downturn. 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 a psychological boost. People needed to be told that this market had already bottomed out and is on its way up," he noted.
On his own part, Mr. Amaeze Olisaemeka, General Manager, Apex Securities Limited called on the regulators to ensure that they carry the investors along in their quest to find a meaningful solution to the crisis, putting in place measures that will return the attractiveness of the market in the sight of the investors.
He called for restrictions to be placed on the disposal of shares by banks so as to stem the decline and until the situation returns to normal.
He said, "Lots of investors are looking for a way to exit the market so that they can pay back the facilities they collected from banks, except a restriction is placed on banks from dumping their shares, the major indicators would continue to slide."
To make matters worse, the NSE is leaving out the investors in its quest for a lasting solution to the issue. This put to question the genuineness in the drive by the regulators and operators to arrest the decline. This is because the ultimate beneficiary of the resuscitation, the investors are excluded in the process.
The comments of the director-general of the NSE in recent times have proven that the capital market is not for the ordinary Nigerian
Speaking during the annual general meeting of its subsidiary, the Central Securities Clearing System (CSCS) last week, Onyiuke who is also the chairman of the CSCS disclosed that the capital market is not for everybody, and that the market is for enlightened investors and it would not wait for Nigerians in the remote part of the country to be prepared for the introduction of certain technological innovation before it goes ahead with such introductions.
She stated that anyone who is not ready to embrace the innovations been churned out by it, should exit the market, withdrawing their funds and putting it in other investment vehicles.
She said, "The stock market is not for everybody. To invest in the market, one is expected to be knowledgeable about the fundamentals of the market. To this end, we have decided to commence the introduction of new measures and infrastructure in the market, and we will no longer wait for everybody to be ready. Whoever is not prepared to embrace the exercise should withdraw his or her money from the market and put it elsewhere. If we decide to wait for the necessary infrastructure to be put in place and for everybody to be ready, it is very likely that we will still have to wait for more than 50 years.
We know there will always be criticism when something innovative is about to be introduced, such was the case during the time the CSCS was about to be introduced. Today, people that kicked against the introduction of the CSCS are the ones enjoying it and heaping praises on it. We will go ahead with the plans we have for the market, even if it is only one person that indicates his or her interest."
It is paramount that the NSE in its quest to finding a lasting solution to the issue, carry along all the various stakeholders, including the investors. This will in no doubt help in restoring the lost confidence in the confidence. The NSE and other operators are also expected to disseminate information on decisions reached at various meeting to the general investing public as this will help in preventing speculations, which in most cases, help in further compounding the crisis.
Meanwhile, Analysis of trading activities, shows that on Monday, October 7, 2008, Ashaka Cement Plc recorded the highest share price appreciation, rising by N0.49 to close at N30.49 per share from N30.00 per share at which it opened, it recorded a turnover of 138,420 shares valued at N4.12 million, its earnings Per Share (EPS) stood at N0.81 and its Price Earnings (PE) ratio stood at 37.64, Daar Communications followed with a gain of N0.12 to close at N5.90 per share, it exchanged 313,510 shares valued at N1.81 million, its EPS stood at N0.02 and its PE ratio stood at 295.00, Goldlink Insurance Plc garnered N0.02 to close at N1.48 per share, it traded 20.76 million shares valued at N30.41 million, its posted an EPS of N0.10 and a PE ratio of 14.80.
On Tuesday, October 8, 2008, Thomas Wyatt Nigeria Plc recorded a share price gain of N0.24 to close at N5.07, it exchanged 100,000 shares valued at N0.51, its EPS stood at N0.01 and its PE ratio stood at 507.00.
Associated Bus Company Plc followed with a gain of N0.11 to close at N2.45 per share. It recorded a turnover of 2.51 million shares valued at N5.84 million; it notched an EPS of N0.12 and a PE ratio of 20.42. Nigerian Aviation Handling Company Plc gained N0.05 to close at N14.85 per share. It traded 1.63 million shares valued at N23.91 million, posting an EPS of N0.82 and a PE ratio of 18.11. Dunlop Nigeria Plc recorded a share price appreciation of N0.01 to close at N2.05. It traded 5.33 million shares valued at N10.8 million.
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