EXPERTS PREDICT BLEAK XMAS FOR STOCK MARKET PLAYERS…NSE DG SAYS CNN FRIGHTENED NIGERIAN INVESTORS

In an extension of the warnings of FORTUNE&CLASS Weekly to investors not to be quick to excitement in the wake of the sudden resurgence of stock prices at the stock exchange, some stock market analysts have predicted a bleak Christmas season for stock investors that are hopeful of making some gains in the market to supplement their expenditures during the Yuletide season.

FORTUNE&CLASS Weekly, had, in a special review of the stock market in its issue 43, informed the investing public to be wary in rushing to the market in the expectation of reaping a bounty because of the surge in price. The report revealed that the ascendancy of the bull in the market was merely a machination of the early birds institutional investors and financial institutions that had, in collaboration with selected stockbrokers, driving market prices of targeted stocks with intention to dump when prices of the selected stocks attain pre-determined price threshold.

With the market reversal to the pre-eminence of the bears as characterized by persistent price declines, market analysts have dared to warn that the market till the second quarter of next year (2009) will be a play ground for institutional and financial sector speculators that have some liquidity to play the market to recoup losses earlier incurred.

“An overview of the market shows that most institutional players and financial sector investors are only interested in salvaging what they can of the loses they made when the market started experiencing the downturn.” One of the analysts reasoned.

“The fact is that this category of investors entered the market when stock prices were at the bullish high, just at about that time prices commenced dramatic fall. So, what these investors are doing now is to raid the market which, in truth, has many fundamentally strong stocks that are selling at rock bottom prices. Before the return to the recent round of price decline, you will observe that about eight stocks appreciated by 25 percent and above, so, it made good business for these speculators to dump their shares and take profit. This is what led to the market slip to the bears once again.”

Speaking on the prospect of a stock market rebound as the Christmas season approaches, another market analyst said the illiquidity in the market still persist just as confidence building by regulatory authorities falters.

“The hope of a rebound in the market as Christmas approaches is quite bleak. Do not forget that we have two major celebrations in December, that is, the Idel Fitri and Christmas. Now, most people would want to raise money for the pleasure of these two celebrations. Either the market is low or not, there are so many investors whose store of wealth is actually locked-in in their stocks, so naturally, they will approach the market to sell what they can dispose off. This will add to the surfeit of stocks in the market and, of course, when there is a continuation of stock dumping, the market appreciates in the negative.

“I must, however, say that this review is not absolute, government may decide to intervene before then or the Central Bank of Nigeria may introduce some revolutionary approach to salvage the market from the bears, however, if this is not done, I think market speculators would become set in their ways. The scenario I see is that a number of high profile stock broking firms with the banking of some commercial banks can target selected stocks, conduct a raid on them and once the prices appreciate to a certain level, they sell off within a short period. This is what we experienced about two weeks ago.” The analyst posited.

Meanwhile, the Director-General of the Nigerian Stock Exchange, Prof. (Mrs.) Ndi Okereke-Onyuike has argued that Nigerian investors were frightened away from the capital market by the global influence of the Cable News Network (CNN).

In a chat with Proshare Nigeria, an online investment focused platform, Prof. (Mrs.) Okereke Onyuike explained that the global phenomenon ought not to affect the nation’s capital market.

“What happened the last time was a global phenomenon; which ought not to affect our market; because the fundamentals of quoted companies in our Nation’s Stock Exchange are strong and resilient. Investors always join the bandwagon; however, the global influence of the CNN actually frightened our investors and caused the panic selling.” The Stock Exchange DG said.

“As these investors observed events, every market in the world was coming down, they did not realise that these Markets were coming down due to certain fundamental issues that went wrong in the Western economy. Investors in Nigeria believed that as things were coming down in places like New York, London, Paris and other advanced economies; that Nigeria would also be affected and maybe worst hit. They didn’t realise that in our case we are not too exposed to foreign investors. Maybe their (foreign) participation in the market is less than nine percent (9%). This coupled with Portfolio Managers who dumped shares and even then, the dumped shares were bought over by Nigerians. Therefore, it was the media panic; specifically CNN that frightened our investors.” Prof. Okereke-Onyuike further affirmed.

Pleading with investors to resume participation in the Nigeria stock market, the DG said: “I am urging Nigerian investors to come back to the Market, there is no need running away from it. We are trying to rebuild the confidence in the Nigerian Capital Market because our quoted companies are resilient with strong fundamentals. Take for instance an organisation like Union Bank of Nigeria Plc (UBN). What are the reasons investors would not want to buy shares of the Bank? The Union Bank stock is selling and has strong fundamentals coupled with a superlative performance.

“Most of our quoted companies, about 90 percent (90%) of them, are doing well. They have not really been affected by the global meltdown. The glut of shares in the market that contributed to its temporary meltdown was due to the fear created by media like CNN on issues relating to the Western World, with this development, like I said earlier on, the Nigerian investors thought that it would be worst in the country; thereby they started dumping their shares.

“However, I think that investors are beginning to gain back confidence in the market and they are also observing that there is nothing wrong with our quoted companies. Those in the Manufacturing, Banking and other sectors are doing well bringing out their results. There goods and services are more in demand than supply, so there is nothing wrong with the market like I said earlier.” The DG elucidated

Noting that it would be a while before the stock market drives its way back to the highs it attained before the decline, Prof. Okereke-Onyuike said: “This is the best time to invest though it will take a little while for the share prices to go back to the original levels they were. Therefore, I advise investors who have liquidity to buy shares in the nation’s stock market; the best time to buy is when prices are low,” She explained.

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One Response

  1. One needs to wait for a clear buy signal from a technical standpoint before rushing into the markets.

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