STOCK MARKET REBOUND…WACTH OUT BEFORE YOU INVEST

The excitement returned to the Nigerian stock market last week when in two days in a roll the market recorded gains that had become foreign to a market that seems to be determined for a southern movement since March this year. For the first time in several weeks, the protracted decline in the measurement of performances of the market moved northward to the delight of investors and all of a sudden the scenario changed from a market saturated with stocks to one characterised by scarcity of stocks as investors desperate bids to buy certain shares were rebuffed by unavailability. Market analysts observed that volume of shares on offer dropped significantly, suggesting a possible retraction from selling, as investors hope for further price appreciation and the bid to purchase shares took an upturn indicating a possible restoration of investors’ confidence.

 

Some more perspective market watchers argued that the market is not yet an all comer affair. Those that offered to speak with FORTUNE & CLASS Weekly said they strongly believe that the market can for now be described as the players market…a market dominated by institutional investors and stock brokers. Private investigations conducted indicated that most small to medium investors wishing to join in the share buying fray so as to profit from the rock bottom prices of many of the now highly undervalued stocks were left in the lurch with bids unfulfilled.

 

Latest news in the market informed that the new momentum driving the market may not be unconnected with the early bird initiative of some commercial banks that have quickly exploited the opportunities offered about the extension of tenor for credit facilities for margin trading and the 360 days elongation of the Central Bank of Nigeria’s expanded discount window.

 

The CBN’s new policy on discount window liberalises access to funds by commercial banks and also extends the repayment tenor of funds borrowed from the CBN through the discount window.

 

A market source confided that some of these early starter banks had provided funds for the purpose of shares purchase to stockbrokers, of course with a proviso for the preferences of shares to be purchased.

This, according to FORTUNE & CLASS source influenced the sudden liquidity position of the market. In light of this, another market player has suggested that small to medium size investors should be very careful not to get their fingers burnt in the supposed reawakening of the market.

 

I can tell you that great opportunities are on offer in the market right now with otherwise fundamentally strong stocks been priced at low price. But as the market seemingly embarked on a rebound, small to medium size investors should be wary of falling into a regretful pit. I want to suggest that investors take note of the following: Nobody is sure at the moment if the market has completely bottomed out. As things stand, institutional investors are engaged in what is called fishing the bottom market and i can tell you that this is an herculean task, because the upturn following a decline is often short lived and results in a continued price decline and hence a loss of capital for investors that purchased stocks during a misperceived or fake market bottom.

 

“Besides, nobody can tell for certain that the market will not revert to the bearish swing again as a result of speculators taking profit from the marginal capital appreciation enjoyed by some of the stocks that gained last week. And no one is sure that a small time investor will get his order for shares purchase effected by his or her stockbroker.”