- Home
- StockWorld
- Nigerian Stock Exchange: Profitability Beckons?
Nigerian Stock Exchange: Profitability Beckons?
- By Business World
- Published Tuesday 13th 2012
- StockWorld
- Unrated
The Nigerian Stock Exchange was not the only stock market that was affected by the economic crash that has been obvious since 2006. Other stock exchanges, especially Asian stocks, fell and headed for the first two-day decline recently since January, while the yen strengthened and treasuries rose after data from the U.S. and Europe signaled slowing economic growth. In retreating European equity futures, the MSCI Asia Pacific Index (MXAP) declined to 1.1 per cent as at last week (Wednesday).
Euro Stoxx 50 Index futures slipped to 0.4 per cent and Standard and Poor's 500 index futures lost 0.3 per cent. Ten- year treasury yields fell two basis points to 1.99 per cent. The yen added 0.2 per cent against the dollar, while Australia's currency fell against 15 of 16 major counterparts. Copper retreated 0.6 per cent for a third day of losses, according to Bloomberg, an online news report and analysis.
In the same vein, U.K. retail sales fell for a second month in February, the British retail consortium said, and data may later show the European economy contracted in the fourth quarter. South Korea's government said it will step up policy efforts to support growth amid rising oil prices. Stocks fell around the world last week after U.S. factory orders declined and China announced the lowest economic growth target since 2004.
Asian stocks have risen for the past 11 consecutive weeks, pushing the MSCI gauge up to 10 per cent in 2012. The Asian equity benchmark trades at 14.8 times estimated earnings, near the highest level since May 2010, data compiled by Bloomberg show.
NSE's Moves
Various schools of thought have argued for and against the integration of stock exchange. The proponents of integration argue that it will create more efficient and globally completive bourses. On the other hand, proponents of multiple stock markets hinge their arguments on the need for competition. In the context of the small, fragmented and shallow stock exchanges in Africa, it would appear that consolidation is the answer to growth and more meaningful development of capital markets. However, it is important to present the two opposing views to this argument before drawing any useful conclusions. In this connection, the management of the Nigerian Stock Exchange has commenced activities in earnest to ensure that the nation's apex market witness an unprecedented turnaround with introduction of various programmes under the capital market committee. The committee is now saddled with many responsibilities; working round the clock all in the name of getting investor's confidence recovered and many more. With these, the NSE has been sustaining rising profile gradually, occasioned by price gains by major blue chip companies as the All-share index rose by 0.2 per cent last week. With 25 companies recording price appreciation compared to 20 that constituted the losers chart, market capitalisation increased by N17 billion, from N6, 441trillion recorded on Monday to N6,458 trillion, while the All-share index rose by 53.06 basis points from 20,439.26 to N20,492.31.
Stakeholder's Perspective
Mr. Babatunde Obaniyi, an investment analyst, who is the head, market risk of Greenwich Trust limited, said the volatility in the stock market is the exit of some foreign investors constitute about 70 per cent of the funds in the stock market currently and they want to adopt a wait-and-see attitude to know the direction the country's currency is going.
He said, “foreign investors have seen that there will likely be the devaluation of our country's currency in future. That is one of the reasons why we have volatility in the stock market. They brought about 70 per cent of the funds in the market. They want to be sure of where the currency is going. They exited in 2009 before the devaluation. Some of them will learn from the past experience now”.
Speaking on the performance, the former president of the Association of Stockbroking Houses of Nigeria (ASSHON), Alhaji Rasheed Yusuff, attributed the losses to the negative pronouncements from the market regulators which reduced investors' confidence in taking position in stocks and the nationalization of the three rescued banks.
Yusuff noted that nationalization of the banks was not a good signal to prospective investors as some of them bought the bank's shares a day before the nationalization, only to hear that their investments were gone.
“Some people bought the shares on the Friday before the banks were nationalized with the hope that the merger and acquisition arrangement would enhance the value of the banks, but they have lost all their investments,” he said. “We were worried that it was going to shake investors' confidence.”
Euro Stoxx 50 Index futures slipped to 0.4 per cent and Standard and Poor's 500 index futures lost 0.3 per cent. Ten- year treasury yields fell two basis points to 1.99 per cent. The yen added 0.2 per cent against the dollar, while Australia's currency fell against 15 of 16 major counterparts. Copper retreated 0.6 per cent for a third day of losses, according to Bloomberg, an online news report and analysis.
In the same vein, U.K. retail sales fell for a second month in February, the British retail consortium said, and data may later show the European economy contracted in the fourth quarter. South Korea's government said it will step up policy efforts to support growth amid rising oil prices. Stocks fell around the world last week after U.S. factory orders declined and China announced the lowest economic growth target since 2004.
Asian stocks have risen for the past 11 consecutive weeks, pushing the MSCI gauge up to 10 per cent in 2012. The Asian equity benchmark trades at 14.8 times estimated earnings, near the highest level since May 2010, data compiled by Bloomberg show.
NSE's Moves
Various schools of thought have argued for and against the integration of stock exchange. The proponents of integration argue that it will create more efficient and globally completive bourses. On the other hand, proponents of multiple stock markets hinge their arguments on the need for competition. In the context of the small, fragmented and shallow stock exchanges in Africa, it would appear that consolidation is the answer to growth and more meaningful development of capital markets. However, it is important to present the two opposing views to this argument before drawing any useful conclusions. In this connection, the management of the Nigerian Stock Exchange has commenced activities in earnest to ensure that the nation's apex market witness an unprecedented turnaround with introduction of various programmes under the capital market committee. The committee is now saddled with many responsibilities; working round the clock all in the name of getting investor's confidence recovered and many more. With these, the NSE has been sustaining rising profile gradually, occasioned by price gains by major blue chip companies as the All-share index rose by 0.2 per cent last week. With 25 companies recording price appreciation compared to 20 that constituted the losers chart, market capitalisation increased by N17 billion, from N6, 441trillion recorded on Monday to N6,458 trillion, while the All-share index rose by 53.06 basis points from 20,439.26 to N20,492.31.
Stakeholder's Perspective
Mr. Babatunde Obaniyi, an investment analyst, who is the head, market risk of Greenwich Trust limited, said the volatility in the stock market is the exit of some foreign investors constitute about 70 per cent of the funds in the stock market currently and they want to adopt a wait-and-see attitude to know the direction the country's currency is going.
He said, “foreign investors have seen that there will likely be the devaluation of our country's currency in future. That is one of the reasons why we have volatility in the stock market. They brought about 70 per cent of the funds in the market. They want to be sure of where the currency is going. They exited in 2009 before the devaluation. Some of them will learn from the past experience now”.
Speaking on the performance, the former president of the Association of Stockbroking Houses of Nigeria (ASSHON), Alhaji Rasheed Yusuff, attributed the losses to the negative pronouncements from the market regulators which reduced investors' confidence in taking position in stocks and the nationalization of the three rescued banks.
Yusuff noted that nationalization of the banks was not a good signal to prospective investors as some of them bought the bank's shares a day before the nationalization, only to hear that their investments were gone.
“Some people bought the shares on the Friday before the banks were nationalized with the hope that the merger and acquisition arrangement would enhance the value of the banks, but they have lost all their investments,” he said. “We were worried that it was going to shake investors' confidence.”
