So many reasons influence liquidity on the stock market and these cut across legal, regulatory, accounting and tax systems.
The efficiency of trading systems determines the ease and confidence with which investors can buy and sell their shares. Also, macroeconomic and political environments affect market liquidity.
Every vibrant stock market is characterised by high liquidity, without which investors would be reluctant to buy shares. Hence poor liquidity introduces a very undesirable downside risk to prospective and current investors. A stock exchange must do all it can to promote liquidity so as to improve public participation in the market.
This is because every investor needs to be assured of maximum right or freedom to manage his/her assets. This freedom borders on the ability to convert assets quickly, with less hassle into cash or cash equivalent, which today's investor is obsessed with. This is referred to as liquidity. The easier it is for investment managers to do this, the happier investors become and are then spurred on to invest more of their resources in such markets.
Against this background, the Nigerian Stock Exchange (NSE) at the weekend unveiled a number of Value Added Services as a key element of its Business Development efforts.
Speaking on the new initiative, Head of Listings Sales and Retention of the Exchange, Mrs Taba Peterside explained that the services aim to attract new listings, create a competitive edge for listed companies, retain current listings, improve investor interest in the market through enhanced information and assist listed companies in complying with post-listing obligations and retaining their listing status.
According to her, "We are partnering with various local and international organisations to provide services such as: Corporate Access, Investor Relations, Institutional Services, Corporate Governance and Independent Equity Research to enhance the value proposition of listing on the Exchange".
The Corporate Governance bouquet is meant to assist the boards and executive management of listed companies to adhere to best practices in the rules and processes by which their businesses are operated. Through training programmes for directors and other stakeholders, The Exchange aims to promote fairness, transparency, accountability and integrity in the organisation's relationship with all its stakeholders with a view to increasing shareholder value, Peterside explained.
In the area of Independent Equity Research, she said that the bourse would engage independent investment research firms to produce company reports for the investing public. "The focus is on less visible listed companies that are not covered by sell-side analysts. The aim is to raise the company's profile and visibility with investors and ultimately lead to more interest and activity on its shares. Reports will be made available for sale through a portal on The NSE's website", she said.
The Corporate Access aspect of the services, as the Exchange explained, is meant for listed companies interested in tracking investor appetite for their shares. It gives them real time access to significant buying and selling activity on their company's stock.
On Investor Relations, Mrs Peterside explained that a well-designed investor relations programme would help to enhance the understanding of a company's strategic direction by the investing community; encourage informed deliberation and analysis among investors and analysts on company's performance through the provision of timely, appropriate and accurate information. She added that it could lower the cost of accessing global capital markets as well as improve a company's market reputation and visibility.
The Institutional Services offering is designed mainly for SMEs seeking to access the Alternative Securities Market. This service is intended to aid SMEs in the design and documentation of appropriate internal business structures, management processes and procedures to position them as world class enterprises. A well-structured institution enhances accessibility to finance.