FEAR STILL REIGNS AT THE NSE

Investors still apprehensive over stock market
Friday Ekeoba, Lagos, with Agency Reports - 11.09.2008
NIGERIAN investors are yet to regain confidence in the stock market despite measures taken by the Federal Government last month to stem its decline, brokers said on Wednesday.


Major performance indicators in the market receded at the close of last week’s activities and continued their decline for two consecutive trading days.

For instance, the total market capitalisation of all listed companies declined last Friday to N10.37 trillion from N10.42 trillion recorded the previous day, representing N36 billion or 0.34 per cent loss.

They reason that despite government’s intervention in the capital market slide two weeks ago, the problem facing the market may be far from being over if the banks continue to shun the Central Bank of Nigeria (CBN) directive that waiver be extended to expired margin accounts to allow the market recover fully.

Most banks in the country continued to be adamant about adhering to the CBN directives to restructure loan facilities advanced to operators in the capital market and some stockbrokers have threatened legal actions against such banks.

The grouse of the stockbrokers is the alleged insistence of the financial institutions on selling investors’ shares on their margin account portfolio.


Querying the new regime of the downturn in the market, the stockbrokers attributed the new wave of meltdown trend in the market, which started last Friday, to the resolve of banks to trade off on investors’ accounts, who could not repay loans obtained through margin facilities to purchase shares in the market.
The brokers insist that emerging signs in the market are an indication that investors do not have a grip of the market, as, according them, the pattern of activities is that huge divestment is still ongoing despite government’s intervention.
Meanwhile, a fresh bearish trend which began last weekend has seen the stock market losing another N111 billion in four days.
Another regime of bearish trend has commenced, in spite of the government intervention barely two week ago, which constituted a Presidential Advisory Committee on Capital Market to find solutions to the depreciation of share prices.

Specifically, sources said the credit management units of the banks had persistently put pressure on their assets management units to recover loans given through margin accounts, thereby making the market to witness more divestment than purchase briefs from investors.

The sources also said that the banks had continued to discountenance the CBN agreement, forcing investors to forfeit their investments.

“One would have expected the market to have rebounded by now, but this is because not all the measures announced have been implemented,” Eugene Ezenwa, chief operating officer of Lagos-based brokerage, Spring Capital Ltd, told Reuters.

“Investors have to regain lost confidence in the market after their experience in the recent past,” he said.

“Most investors are now risk averse,” said Olusola Dada, President of Nigeria’s Institute of Directors and chief executive of Lagos-based Anchoria Securities and Investment.

“It will definitely take some time for investors to regain confidence in the market and for the measures to have major impact,” he told Reuters, adding that institutional investors, including pension funds, had been moving money into the money markets because of perceived higher returns.
Some analysts had warned that the stability measures could be counter-productive, saying that the one per cent minimum decline rule could slow market activity to a crawl.

Sodiq Wasiri, head of research at a brokerage firm, Lead Capital Ltd., said allowing companies to buy back shares was a more complicated procedure than might have been expected.

“The process of getting approval from the SEC is so cumbersome that by the time a company gets such approval to buy back its stock to save it from sliding, it would have gone haywire in terms of a price slide,” he said.

He said the initial upturn in the market after the measures were announced was caused by investors minimising losses rather than because of renewed confidence. Those investors were now taking profits after a slight rebound