9 July 2012

Nigeria: NSE May Continue to Record Low Investors' Participation - Rewane

Low investors' participation that is currently being witnessed in the Nigerian Stock Exchange (NSE) with regards to equity trading is not expected to abate soon, says Mr. Bismark Rewane, Managing Director/CEO, Financial Derivatives Company Limited (FDC).

Rewane made the remark in his monthly Economic News and Views at Lagos Business School Executive Breakfast Meeting for June, 2012.

He stated that policy paralysis among other things is still keeping out retail investors from active participation in the market, adding that the downward trend would continue in July but at a reduced rate.

The FDC boss, however, noted that investors have started reacting favourably to strong earnings release from most companies, while noting that a trend reversal would begin from mid July.

Rewane said, "Results from the banking sector will stimulate a short bullish run. Naira depreciation and persistent inflationary pressure means interest rate will remain high. We expect a positive return between two to three per cent for July."

"Looking out the next 6-12 months, we see the market as being higher than it is now. In the short run, it is a bad environment with 50/50 odds of breaking out below the 200 day moving average of 20,952.61," he added.

Rewane added that valuations, especially that of local lenders were compelling and are beginning to strengthen market activities, affirming, "Banks balance sheet are now at a level that can be considered clean."

He further stated that stocks in the consumer sector have equally performed favourably, saying that they are not lagging behind.

He observed that activities in the stock market dipped by 2.84 per cent in June, but is witnessing a bubble in July

He further explained that the lull in the primary segment of the Nigeria capital market, where the market has recorded limited Initial Public Offering (IPO) since downturn in 2008 was not peculiar to Nigeria, saying that it is a global trend.

Rewane stated that following the economic recession that hit stock markets around the world, global IPOs have fallen from 2008 high, adding that equity investments by the Pension Fund Administrators have also fallen sharply, while bonds investments are on the increase.

He observed that while there was 88 IPOs between 2006 and 2008 in the Nigerian Capital Market, there have been no new listings from 2009 to 2011.

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