Another crash looms, capital market investors warn

Another crash looms, capital market investors warn

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…as indicators hit lowest points in 2 years

  • No cause for alarm –regulators

Investors in the Nigerian capital market have predicted that if nothing urgent is done to correct the free fall of market indices, Nigeria may witness yet another crash.

To guide against being caught unawares like in 2008, many of the investors, who spoke with our correspondent, said they had started selling off their shares in anticipation of tougher times in the capital market.

The market capitalisation of listed equities, for instance, fell from N9.23 trillion as at December 30, 2015 the lowest in two years, while the All Share Index of the Nigerian Stock Exchange also dipped from 30,053 to 26,840.64 within the same period.

An investor, Mr. Kehinde Ejioye, told our correspondent that he had diverted his investments from the stock market to the property sector. The agric-economist, who said he ought to have invested about N1 million proceed from his farm in the capital market, added that he changed his investment plan based on what he described as a blinking future of the market.

To another investor, Mr. Caleb Itabiyi, the state of the market reflects the true state of the Nigerian economy. He said, “Unless the economy rebounds, the slide in major market indices will persist. It is just a sign of what to expect in 2016 as the nation’s export has been consistently low since May 2014 and that is likely to continue till next year.

“I sold my shares in Zenith Bank, Flour Mills and Access Bank in October and used the proceeds to invest in food items at the wholesale level. I am certain that it will give more returns on investment than the stock market because food is an essential commodity.”

The General secretary, Shareholders Association, Ibadan zone, Mr. Eric Akinduro, has also indicated that the market may be heading for a crash. The investor, who previously encouraged members of his group to be optimistic about the potentials of the market, said he was no longer sure whether the market still had the potential to rebound in the face of several economic challenges like the fall in the price of crude oil and consistent drop in the value of the naira, among others. Like Itabiyi, he said the bourse might sustain a slide till the end of the second quarter of next year.

According to him, discerning investors, whether local or foreign, cannot invest in the market, considering the lack of a clear economic policy direction from the Federal Government.

“The only thing we have seen from the President Muhammadu Buhari administration is the fight against corruption and that alone does not translate into economic direction. We need policies that can give specific direction to the economy,” he said.

‘REGULATORS CAN DO MORE’

Managing Partner, Ned Phillips Capital limited, a stockbroking firm, Mr. Adebayo Ajayi, urged the financial system regulators like the Securities and Exchange Commission, Central Bank of Nigeria and the NSE to put adequate measures in place to protect the market and the economy from witnessing another crisis.

The stockbroker advised government and its agencies to safeguard the market as it was done in developing markets like South Africa, Egypt and Kenya, among others.

In South Africa, for instance, there is the Black Economic Empowerment policy, a growth strategy to target economic inequality between whites and blacks in the country. With the BEE laws, white-owned companies with annual revenue of at least five million rand are given ratings for enabling blacks to own shares, improve their skills within the company and move up the managerial ranks among others.

Kenya too has measures to encourage participation by its local investors. For instance, 40 per cent of initial public offer subscription is reserved for local investors with incentives specially aimed at encouraging companies to list. Ajayi explained that the effect of these measures introduced in 2012 was already yielding the expected benefits with the listing of Safaricom, a major telecoms operator, and Barclays, an international bank, among

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