Nigerian Stock Exchange. Brokers plan Recess.
October 15th, 2008 Ogbuotobo Chuks || chuks@stockmarketnigeria.com
After 6 months of straight losses coupled with eroding values of shares in the Nigerian Stock Exchange, there are indications that the stock market may close until the present situation improves.
This is one of the many options that were recently considered by the brokers as they once more called on the government to find a permanent solution to the lingering crisis. Also, they also suggested that the new price movement rules as regards the 1 percent max price loss daily be reversed back to the previous 5 percent. They further argued that Central Bank of Nigeria should further reduce the monetary policy rate by another four to five per cent so as to reduce pressures on banks sourcing for deposits.
The market downturn has been on since March 2008 and the market has lost value in excess of N4 trillion. Also recently, two more banks indicated their interest in acting as market makers but still there is no concrete information as to how and when the impact of all this would be felt.
The stockbrokers would again meet on Friday to take final decisions on their next line of action.
(4 votes, average: 2.5 out of 5)
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What is happening to our stockmarket is nothing else but the side effects of broad lending. I want to use several anologies but we can talk about Bpp. What we understand about buying power paraire is that trade can take two parts process on on a specific demand and supply with respect to any one country…until prices soughts itself out. This means that without our standard we can rely on foreign companies to show us the way.
With exchange driven to the price of say Euro…almost 210 to I Naira, some idiot from England or Europe will just hand bag with something in the neighbourhood of I billion Euro. Prices will go up so fast that it will attract Nigerians and when poor Nigerians have added to thier spread they withdraw thier money and watch you crumble.
What happened in Nigeria is that too much money moved for nothing and they matured usually six months to nine months…they gradually withdrew the money. It sounds harsh…but look at Us stock market as at Friday 10/10/08…nearly twenty percent dissapeared and then 20 percent or so appeared by monday. you see people were moving thier money from money market to checking in such panic didn’t have to take in out, they sold it and reverted the money…but by monday 10/13 when nearly 40% of stock value is viped and the people who began the panic simlpy returned thier own money and bought up everything at 40 profit before the next business day. In fact the US bond market was placed on hold…almost like it was rigged but these bond represent minority investors in US…people with social security, some of whom are not protected by fdic.
If you don’;t undertsand what happened Globally all over the world, I want to watch the idea of 20%. Better, try to find a solution for Reiman integrable with first understanding that it is just a four part quadratic equation that will give you the same 0.
The second side of the story is that prices do not follow forex.Prices are relative to any country’s market but the so called value remain the same. Nigeria tagging its country to rest of the world was a serious mistake. Our supply penetration for narrow goods were small, to the degree that we can only hope to push ur markets in the power of that weak infrastructure. Allowing too much currency into Nigeria only breaks the country buying power to the highest forex because real time attention on the performance of the Naira is misplaced. If dollars and Euro migrate inot Nigeria without NAIRA, that is if foreigners are trading in the country with thier unit of exchange an dnot ours and if they ask Nigerians to send thier money through dollars and not Naira that is they are peculating a serious disservice to the Host country. It is impossible for host currency to survive these attarcks from outside, because banks will be looking to add those small change from charges…which untimately screws the host Nation.
All transactions are done with the NAIRA… we can retrace the problem. That is, which bank borrowed the most and how did they leverage. When the stockmarket is threatened, we can apply certain measures…. If 90% of our economy is still commodity…any more than 10% on the broad money is showing signs of danger. Without your unit of exchange as teh final boss…the forex will determine the price of your market. Sometimes, it is not how much you spend that makes you rich but how less.
‘British economy since 1945′ page 120 is a book you wanna read to see what happened to bank with too headwind following the success of 1972. “In achieving thier objective of encouraging greater competition in the banking system, they appeared to have surrendered monetary control”.
Sounds like panic stations to me. They want to shut down the mkt and also at the same time eliminate the artificial controls. If they revert back to the 5% maximum movement, then they are going to have even greater losses.
I don’t know what they hope to gain from closing the mkt down for how long? When do they think the mkt will improve? The whole issue is a matter of psychology. If the market makers, the pension funds and the various unit trusts can wade into the market now, it won’t take a while before our mkt will be healed. All we need to do is improve on market confidence. If we can restore confidence just as we have seen in the US, things can and will turn around.
It’s my belief that a market correction was on the cards for our market before the financial crisis that coursed most of the foreign portfolio investors to head for the hills with their loot. since the correction has been exacerbated, we need to instil confidence in the market - reduce interest rates, reinstate margin facilities make the right noises (CBN Governor, Minister of Finance, President Yar’ adua) and of course stop unnecessary approaches to the capital market for a while. Too many of the latest issues have been frivolous, especially from the banks.
how does the stock market close? no more trades will be allowed? why not delist the troubled companies instead?
am surprised that the brokers are advocating recess in the absence of immediate government intervention. what about their livelihood, what about the operators in the market, what about their staffers, all been on the line. the ripple effect will be phenomena. even though am beginning to think that the government seems not to have confidence in the market as expected or better still lack the where withal to effect immediate solution to the lingering down trend which if not abated may break the back bone of our economy, still all hope is not loss. from my own perspective, i think the goverment should move in now and take up about 25 to 30 percent of the equities in the market which naturally will lead to artificial price gains and they should hold on to it till the market beging to experience real gains. and later, on the brink of evenness, start to release their holdings in a gradual process just the same way they control money in circulation thru CBN tresury bills, certificates and other instruments. you will recall the same guidelines was giving earlier on for the listed company to share buy back, but am sure will lead to possible market manipulations to the benefit of the companies involved. instead the goverment can hold the trust for us all.
Apart from this,they could also look at some market restrictions in areas of price ceilings whenever any movement whether up or down is getting double or half just for istance within too short a period. or better still the uncoventional price movement that makes a securities to gain or loose in an abnormal fashion.
I am in support of closing the market till it improves.For goodness sake people are lossing their money believe me if not closed temporarily some banks and other companies will drop.thanks