MarketWatch

[billions]

Proshare News and Analysis
CBN eases monetary policy
Posted Wednesday, September 24, 2008


The Monetary Policy Committee of the Central Bank of Nigeria (CBN) rose from an emergency meeting held on Thursday 18th September 2008, and reviewed several policies aimed at stemming the lingering liquidity squeeze and its attendant impact on the economy. The meeting was also convened as a direct response to rising concerns that the recent turmoil in the global financial markets might impact on emerging and frontier markets, of which Nigeria is one, over the medium to long term.

Consequently, Monetary Policy Rate (MPR) was cut by 50 basis points to 9.75% while Cash Reserve Ratio (CRR) and Liquidity Ratio (LR) were reduced to 2% and to 30% respectively. In view of the high cost of credit in Nigeria (currently over 20%), the apex bank reduced benchmark rate from 10.25%, implemented about six months ago. This is expected to reduce interest rates in the economy, encourage borrowing and drive economic growth. Hitherto, the CRR and LR were held at 4% and 40% respectively by the CBN. In our opinion, this move is aimed at enhancing banks’ capacity to create credit and lend to the real sector of the economy. However, given the need to generate better margins, particularly in view of recent downturn in the equity market, which has dipped into their operating performance, most banks would be more inclined towards short term consumer lending and investments in short tenored notes.

A key reason for the policy review is Nigeria’s growing and real linkage with the rest of the world. Therefore, Nigerian regulators are becoming increasingly mindful of developments in the international financial markets. Also, it was observed that the banking system in Nigeria was becoming illiquid as a result of the partial drying up of credit lines to Nigerian banks following the global liquidity crisis, the previous mop up of liquidity by the CBN and the slow absorption of capital budgets by various government ministries.

In our opinion, the drop in rates will assist in enhancing asset quality in view of the rising interest and lending rates. Given the increasing cost of funds in Nigeria, we believe this latest move by the apex bank will go a long way in averting a possible financial crisis given the rising interest rates and the ever present possibility of some institutions not being able to service existing loans. In addition, according to the CBN, asset prices in the stock market were going down and at the same time the money market was drying up due to the lack of fresh funds. Therefore, banks would have had problems in the months ahead as a result of the market’s unwillingness to take new loans, which would result in a reduction in revenues and profits for the banks.

However, real rate remains negative as pressure will be exerted on aggregate prices. As a result of the reduction in MPR, Nigeria’s negative real interest rate will increase by 50 basis points to -4.25% from the previous -3.75%. Meanwhile, the apex bank remains highly optimistic in view of the nation’s strong economic fundamentals which indicate that foreign reserves currently stand at c. $63bn (c. 16 months of total forex disbursements) while foreign investment inflow of $8bn as at end of August 2008 compared with $5.8bn in August 2007.

We anticipate that yields will drop and government securities will become less attractive. The Nigerian money market has been very active over the last one month following low volume of cash in the system as banks curtailed lending while fiscal allocations for August were unusually delayed. During the period, average yield on treasury bills rose to about 9.5%, while interbank rates averaged 17.4% (as against 15.4% in August). Some liquidity began to kick in early in the week and by mid-week, interbank rates came under pressure. With these policy adjustments, we expect yield on treasury bills to drop marginally, while interbank rates would shrink as a result of lower demand for interbank placements.

We expect equity investors to react; first a restraint in selling pressure is anticipated as exiting investors watch overall market reaction while those waiting on the sidelines scramble to get into the market. This would however be short-lived as profit taking kicks in again. Although, we are of the opinion that the effect of the increase in liquidity would trickle down to the equity market, we do not expect it to bring about a sustained recovery in equity prices.

Overall, given the increasing level of competition in the banking sector and uncertainty about the short term prospects of the equity market, we do not believe the banks would be easily disposed to give share purchase loans especially as a few big ones are shoring up their positions and balancing their books for their respective FYEs.

In view of the foregoing, we expect the banks to be cautious and adopt a conservative policy in their lending despite the expected increase in liquidity. The equity market has lost enormous value and besides, it will take a while before investor confidence is restored. Meanwhile, we do not anticipate a substantial reduction in banks’ lending rates given weak correlation between lending rates and the benchmark rate in Nigeria.

[muranay@yahoo.com]

Originally Posted by ntom

is ndi still there if they like let them bring in trillions until there is a change at top the market will not change

Microsoft unveils $40bn buy-back
By Agency reporter
Published: Wednesday, 24 Sep 2008
Microsoft has unveiled plans to spend $40bn buying back its shares from investors, the biggest single buy-back plan in history.

According to the British Broadcasting Corporation News on Tuesday, analysts say the move is an attempt by the software giant to use its spare cash to prop up its share price, which has fallen by almost 30 per cent this year.

Hewlett-Packard and Nike have also announced major buy-back programmes.

The personal computer-maker will buy back $8bn of shares, while Nike’s plan is worth $5bn.

Microsoft said the buy-back plan showed its “confidence in the long-term growth of the company and our commitment to returning capital to our shareholders.”

Industry watchers have said Microsoft will be hoping the plan will revive its share price, which has declined this year, partly due to its failed $47.5bn bid to buy the Internet portal Yahoo.

“I am impressed,” said Michael Holland of the deals. He oversees $4bn as chairman and founder of Holland & Company in New York.

“When companies have come in to buy their own stock subsequent to a financial crisis, they have bought at attractive prices and it’s been a good use of liquidity,” Holland told Bloomberg News.

At the end of June this year, the company was sitting on a cash mountain of $23.7bn and has never been in debt in its 33-year history.

The BBC’s technology reporter, Ms. Maggie Shiels, said there was little doubt Microsoft had to do something because it simply had too much cash lying on its books following the company’s failed attempt to buy either all or part of Yahoo.

Dealogic said the new buy-back, which would run until 2013, was the single biggest share buy-back in history. It follows a previous 2004 plan, which started as a $30bn project and was later boosted by another $10bn.

HP said its board approved an $8bn repurchase following a previous programme, which started in November. About $3bn remains from that authorisation.

[billions]

Warren Buffett today agreed to invest $5bn (£2.7bn) in Goldman Sachs, giving the bank a strong vote of confidence following the tumultuous Wall Street events of the past few weeks.

Analysts hailed the move by Buffett - known as the Sage of Omaha - as a sign that some stability could be returning to the markets. UBS called it "the ultimate stamp of approval".

Buffett, the world's second-richest man, acted after Goldman and Morgan Stanley changed their status from investment banks to more traditional banks, ending a Wall Street era.

After the wild swings in shares over the past fortnight, news of his investment calmed the London stock market today. The FTSE 100 was up just 2.8 points at 5138.9, sparking a late overnight rally on Wall Street.

Shares in Goldman were expected to surge by at least 20% when New York trading resumed. Wall Street was expected to be boostede, with the Dow Jones industrial average tipped to jump by 128 points.

Buffett is widely admired for his astute, common sense approach to investment, and the annual meetings for his Berkshire Hathaway company in his hometown of Omaha, Nebraska, draw huge crowds.

Earlier this year, he toured Europe looking for acquisition targets. Until now, he had held off buying stakes in any of the financial companies hit by the credit crunch, instead favouring a deal for the chewing gum maker Wrigley's.

"Goldman Sachs is an exceptional institution," Buffett said yesterday, citing its "unrivalled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance".

Lloyd Blankfein, the Goldman's chairman and chief executive, said he viewed the deal as "a strong validation of our client franchise and future prospects".

Goldman is also planning to raise $2.5bn in a public offering of shares, with the capital-raising plan coming as the US treasury secretary, Henry Paulson, visited Washington to defend a planned $700bn bailout of Wall Street.

In a separate move, the Japanese financial powerhouse Sumitomo Mitsui was also reported to be planning a large investment in Goldman Sachs.

Earlier this week, Morgan Stanley raised around $8bn by selling a 20% stake to Japan's largest commercial bank, Mitsubishi UFJ Financial.

Both Goldman and Morgan Stanley maintained that their businesses were sound in recent weeks even as Lehman Brothers went bankrupt and Merrill Lynch sought shelter by selling itself to Bank of America for $50bn.

Goldman has remained profitable, although its earnings have taken a hit. However, the fear in the markets put both Goldman and Morgan Stanley under pressure, regardless of any reassurances.

Berkshire Hathaway will take preferred shares in return for the investment, and will have the right to buy a further $5bn in ordinary shares at $115 a share at any time over the next five years.

Analysts said the deal had been structured in such a way as to protect Buffett's investment from being wiped out.

Tim Ghriskey, the chief investment officer at Solaris Asset Management in New York, said; "It is certainly a vote of confidence in Goldman and their new structure. Any time Warren Buffett and Berkshire Hathaway step in and invest in something, everybody takes notice."

Under their new status, Goldman and Morgan Stanley will have to reduce the amount they can borrow relative to capital ratios.

They will be subject to greater regulation, but will also be able to borrow money from the Federal Reserve.

Anton Schutz, a portfolio manager at Mendon Capital Advisors in Rochester, New York, said the government bailout for the financial sector meant it was a "great time to be buying".

[Catweasel]

close of market today

6500 trades
314 Million shares exchanged
N2.78 Billion volume.

and a Red Sea of 1%ers

It would appear that the low volumes may be with us for some time as this is consistent with yesterday.

I also reckon that apart for the mass evacuees there are still a number of speculators and market manipulators playing the field.

E.g. over the last couple of weeks Red Star Express has virtually every day looked like rising, often hiting a high price of 5%, but never quite breaching the 100,000 threashold for the price to stick. Yesterday, at last it moved 200,000 units and a gain of 4.5% Now today, it did not move any units for the first hour of trading, then went up aroung 4%, then at the close of play 1% down with uncharacteristcally half a million units traded.

The majority of us have to mandate our brokers in advance and cannot therefore react to intra-day changes in stock price patterns. However, at the risk of subscribing to the conspiacy theory it would appear that others can.

This really is a frustrating market to invest in.

[threecrown]

All Market Data as @ Wednesday, September 24, 2008

NSE Index change %change
46,723.42 -251.12 -0.53%

[billions]

Originally Posted by threecrown

All Market Data as @ Wednesday, September 24, 2008

NSE Index change %change
46,723.42 -251.12 -0.53%

-0.53%...simply terrible.

[panej]

Originally Posted by Catweasel

close of market today

6500 trades
314 Million shares exchanged
N2.78 Billion volume.

and a Red Sea of 1%ers

It would appear that the low volumes may be with us for some time as this is consistent with yesterday.

I also reckon that apart for the mass evacuees there are still a number of speculators and market manipulators playing the field.

E.g. over the last couple of weeks Red Star Express has virtually every day looked like rising, often hiting a high price of 5%, but never quite breaching the 100,000 threashold for the price to stick. Yesterday, at last it moved 200,000 units and a gain of 4.5% Now today, it did not move any units for the first hour of trading, then went up aroung 4%, then at the close of play 1% down with uncharacteristcally half a million units traded.

The majority of us have to mandate our brokers in advance and cannot therefore react to intra-day changes in stock price patterns. However, at the risk of subscribing to the conspiacy theory it would appear that others can.

This really is a frustrating market to invest in.

That's very vigilant of you!! How do yo get your intraday information?

[BLUEMONEY]

Originally Posted by zainabusman

It will take time for us to fall back to the low of 26th August of 43,199 as long as the 1% rule is on. Infact going by the "average" 0.45% daily drop we have been having we will need another 18 straight trading days of decline to reach that.
An interesting thing to note is that a few stocks are getting close to their year low, these include Access, Zenith and FBN.

Well the market could not wait for another 18 days as a new record was set today.

[BLUEMONEY]

Originally Posted by billions

-0.53%...simply terrible.

Men, it is more than Terrible. The word to describe it just escaped me.

[BLUEMONEY]

Originally Posted by muranay@yahoo.com

Those measure are going to have positive impact on the market on the long run and not overnight as some people may think.

I do not think any company will want to go on share buy back at a price higher than its last public offer.

Also share buy back is a new development thus companies will need time to strategize on how best to handle it.

The Share buy back measure is very good but each time I hear about it, I Laugh because I am yet to see a company that will go down that road. Even those that are willing may not have enough in thier reserve to undergo such a project.

And those that have the cash in thier reserve to do it are not willing for now to buy back nothing but will rather pump the cash into other things. some of them will rather invest in other profitable ventures than to buy even 5% of thier own shares.

And may I State here that most companies on the NSE are no strangers to this measure especially the Banks. they have been involved in the illegal act of buying more than stipulated amount of thier shares when the market was upbeat only to deny when they are approached by the SEC.

When the measure was introduced in thier August meeting, I thought because some of the Banking Heads were present then they will act on it thinking that they were in Sync with the decision but now I know better.

If they could not play thier part to end the massive selloff of margin positions and thier own portfolio then I dont see why I expected them to buy back anything. Now I know that they are Proper Chameleons.

[BLUEMONEY]

Originally Posted by olusolakemmy

most coys are selling below their last public offer prices, some are very close to their year low and so why cant they buy back.

the thing is this guys are not stupid, most of them are fully aware of numerous booking keeping going on in the market most of which the coys are involved.

so asking them to buy back means you are telling them to eat their feaces.

whatever, i want to agree with you, that most of this policy if properly channel, will have effect at a later date.
But i have a problem with policy changes and the guys implementing them in Nigeria.

And if you check, most of them selling below thier offer price were among those that bought back thier shares illegally to shore up the price before the offer, so like you said, they cant be expected to eat thier feaces.

[BLUEMONEY]

This our market must be Properly Delivered from the hands of Nigerian banks Especially.

A situation where the majority of the funds coming into the market is from the Banks is not good at all. Now we are talking about market makers and thier minimum paid up capital I believe is about N2 billion and if you ask me, the money will be coming from the Banks because I dont see how the normal stockbroking firm will raise that amount.

The influence of the Banks on our market I believe is more than the influence Gen. Sani Abacha had on the nation before we were delivered. To my mind thier Dictatorship in our market is too much and we need thesame Divine Intervention like we had 10 years Ago.

BABA GOD, we Commit this Market into your Hands, Do in the Market what you did to the Dictator in this Nation 10 years Ago -- AMEN.

[hispy99]

Investment tribunal develops safety net for investors
By Atser Godwin, Abuja
Published: Thursday, 25 Sep 2008

The Investment and Securities Tribunal has developed a safety net to protect investors’ interest in the capital market.

The Chairman of the IST, Dr. Nnena Orji, said this in a paper she presented when members of the Ibadan Zone Shareholders’ Association paid her a courtesy visit.

The safety net, otherwise known as Investor Protection Fund is a brain child of the IST, Orji said in the paper which was made available, to our correspondent on Wednesday.

Although details on how the Fund would protect investors were still sketchy as at the time of filing this report, Orji said the framework for the IFP was formed through recent pronouncements of the tribunal.

“More importantly, we have developed the necessary case laws, which broadly define the ways and means of doing business in the capital market,” she said.

“Through these processes, we are making sure that our capital market is on the path of orderly evolution,” she added.

Orji said that despite the turmoil in American and European financial markets, the Nigerian capital market was safe.

She described the current lull in the market as a normal pattern in capital markets all over the world.

“It is usual for investors to experience some lull in the market from time to time depending on world economic cycles.

“That is why we have the bear and the bull runs in the market. Everyday, they say, is not Christmas,” she said.

After hitting a resistance of N12.6tn in March, forces of gravity have continued to sustain a hold on Nigeria’s bourse in the last six months, forcing the market capitalisation to decline by more than 28 per cent.

Analysts, however, say the market is simply correcting itself as they cite strong market fundamentals.

Orji said the tribunal would continue to serve investors’ interest in order to engender transparency and accountability in the market.

“May I also put on record that at the tribunal, we have strived to serve the best interest of investors by working to enthrone the rule of law in the operations of the capital market. The tribunal had in its rulings and decisions, consistently made it clear that investor protection was paramount in the operations and regulation of the market,” she said.

She commended the shareholders, stressing that as important stakeholders in the market, their contributions were necessary for the growth of the market.

[Catweasel]

Originally Posted by panej

That's very vigilant of you!! How do yo get your intraday information?

From the NSE - Live! web-site. I just focus in on the stocks that are of particular interest (latterly concern) to me.

You will hit the F5 button a lot!!