Is a stock market crash possible in Nigeria?

[suni]

Originally Posted by hispy99

Drop in price is not a "foreign phenomenom"; there have been several years where the NSE ASI index declined.

I quite agree with you, but what I mean is that "black power" as in juju cannot stop market crash when it happen, of course it cannot regulate the movement of the market.

[oseitutu]

Proshare newsletter today says the NSE is not overpriced and there is no imminent crash, even though everybody thinks it is the best place to be, moneywise. The bubble may soon burst!

[pumping]

I'm really surprised that after all said and done, they have said they cannot see any of the signs below on the NSE!! Let me mark the ones that are alread prevalent.

High valuation level
• Dividend yield falling below 5% - Yes, for most stocks
• Widespread bullishness - Yes, all year till recent bear run
• Belief that present scenario is different and history will not repeat
itself this time.
• Trumpeting enormous gains to be made in the stock market by
professionals and media - Even the NSE is doing this.• Rising interest rate - Interest rate was just raised to curb inflation• Stocks no longer reacting positively to strong earnings - The banks are a very good case in point. Instead stocks of companies announcing losses make maximum gains.
• Traded volume expanding significantly
• Excessive speculation among low price stocks. - Penny stock syndrome is very much here• Breakdown/weakening of a large number of blue Traded volume
expanding significantly
• Excessive speculation among low price stocks.
• Breakdown/weakening of a large number of blue chip stocks
• Market unable to move higher despite
-----
These ones are very much with us on the NSE.

[pumping]

I'm really surprised that after all said and done, they have said they cannot see any of the signs below on the NSE!! Let me mark the ones that are alread prevalent.
----------------------------------------------------
• High valuation level - We can see this with many penny stocks

• Dividend yield falling below 5% - Yes, for most stocks

• Widespread bullishness - Yes, all year till recent bear run

• Belief that present scenario is different and history will not repeat
itself this time.

• Trumpeting enormous gains to be made in the stock market by
professionals and media - Even the NSE is doing this.• Rising interest rate - Interest rate was just raised to curb inflation

• Stocks no longer reacting positively to strong earnings - The banks are a very good case in point. Instead stocks of companies announcing losses make maximum gains.

• Traded volume expanding significantly

• Excessive speculation among low price stocks. - Penny stock syndrome is very much here

• Breakdown/weakening of a large number of blue chip stocks

• Market unable to move higher despite increasing volume
-----
These ones are very much with us on the NSE.

[huru]

Originally Posted by pumping

I'm really surprised that after all said and done, they have said they cannot see any of the signs below on the NSE!! Let me mark the ones that are alread prevalent.
----------------------------------------------------
• High valuation level - We can see this with many penny stocks

• Dividend yield falling below 5% - Yes, for most stocks

• Widespread bullishness - Yes, all year till recent bear run

• Belief that present scenario is different and history will not repeat
itself this time.

• Trumpeting enormous gains to be made in the stock market by
professionals and media - Even the NSE is doing this.• Rising interest rate - Interest rate was just raised to curb inflation

• Stocks no longer reacting positively to strong earnings - The banks are a very good case in point. Instead stocks of companies announcing losses make maximum gains.

• Traded volume expanding significantly

• Excessive speculation among low price stocks. - Penny stock syndrome is very much here

• Breakdown/weakening of a large number of blue chip stocks

• Market unable to move higher despite increasing volume
-----
These ones are very much with us on the NSE.

Pls i have 70% of my investment in NSE, what do you suggest i do?

do i reduce, and to how much. This report is about to give me BP.

i will really appreciate your suggestion pls

[ofonzo]

Investors always talk about market crash! Either when the market is very bullish (Oh!It can't sustain this trend oh) or when it is in correction(Ah!The skies are falling)

I have observed that the market NSE is like a zoo, there are speculators, who drive the share prices sky high and the value investors, who take their time to value a stock's intrinsic value and take advantage when the price is right. These are the guys that SUPPORT the market price. While the Speculators drive the price to its RESISTANCE level.

There are opportunities even in a Stock Market burst as well as a Stock market Bubble. Even in a bearish US Market, Warren Buffet is the World's richest man. What would have been his value in a bullish one. Bethshire Hattaway (his holding company) has its share price plummet from $150,000 to $125,000/Share. The man is still holding on.

Segun

[newton]

Originally Posted by suni

I quite agree with you, but what I mean is that "black power" as in juju cannot stop market crash when it happen, of course it cannot regulate the movement of the market.

Find attached an article on the possibility of a stock market crash in Nigeria by Meristem, pretty informative.

[dejino]

And being down implies that you "recognize and accept" that the Nigerian business environment also obeys the law of gravity: Whatever goes up, will sooner than later, experience a natural tendency to come down. Whether it eventually comes down and how soon it does, is a function of certain recognizable variables

The NSE has experienced an upward and sometimes unexplainable bullish trend in the recent years. So, shall we not declare ourselves naive or at best, playing the ostrich if, we think it will always be up-up and up, forever?

That the Nigerian is an incurable optimist, can only sustain the boom for some time. That most Nigerian investors are just "joy-riders" without a clue as to how crucial "buy/hold/sell" decisions are taken, is not in doubt (can you imagine that some kept buying Afroil and Capoil even when the signs are boldly written that it might go under the probe!).

The Banking sector, the 'consistent' prime-mover of the NSE, is only enjoying the apparent buoyancy simply because we are a strictly cash-based, import oriented consumer economy: import, buy and sell

All the indicators of a very fragile economy, one not backed-up by REAL manufacturing and production, live with us day and night.
The government is entangled in wrangling and inertia caused partly by unprecedented and monumental corruption, depleted infrastructures and most dangerously, paucity of ideas and dodgy-motives on the part of those saddled with policy making and implementation!

I admit, crude oil is free manna from heaven, and still commands a good price but l hope we are all taking note of the giant strides in alternative energy? and the fact that crude oil is exhaustive?
Countries like Saudi, Dubai, UAE are already diverting and re-investing their crude-earnings in other real sectors while our own leaders are 'inventing' more sophisticated means of looting our national assets

Am not a pessimist but l think l am realistic enough to accept what is obvious: The crash will come sooner than expected.
My take is: Diversify, cushion-up and be emotionally ready

Enjoy your weekend.

[pumping]

Originally Posted by huru

Pls i have 70% of my investment in NSE, what do you suggest i do?

do i reduce, and to how much. This report is about to give me BP.

i will really appreciate your suggestion pls

It is not at that level of panic o. Just be careful not to put your money long term in stocks without good fundamentals.

[pumping]

Originally Posted by ofonzo

Investors always talk about market crash! Either when the market is very bullish (Oh!It can't sustain this trend oh) or when it is in correction(Ah!The skies are falling)

I have observed that the market NSE is like a zoo, there are speculators, who drive the share prices sky high and the value investors, who take their time to value a stock's intrinsic value and take advantage when the price is right. These are the guys that SUPPORT the market price. While the Speculators drive the price to its RESISTANCE level.

There are opportunities even in a Stock Market burst as well as a Stock market Bubble. Even in a bearish US Market, Warren Buffet is the World's richest man. What would have been his value in a bullish one. Bethshire Hattaway (his holding company) has its share price plummet from $150,000 to $125,000/Share. The man is still holding on.

Segun

Yes, there are opportunities during a stock market crash, but not for those that were heavily invested in it. The NSE today is behaving like the dot com era. At the end of the day reality overtakes fiction. I'm sure you will not buy a bottle of empty coke for N1,000. Well, that is what many folks are doing on the NSE today. Paying for something that is worthless and even fighting over it.

Now, majority of players on the NSE are just speculators looking for quick bucks. Who cares if the company has closed down or does not have a known address? I will sell to another 'mugu' once the stock price has risen by 50%.

[zainabusman]

Originally Posted by pumping

Yes, there are opportunities during a stock market crash, but not for those that were heavily invested in it. The NSE today is behaving like the dot com era. At the end of the day reality overtakes fiction. I'm sure you will not buy a bottle of empty coke for N1,000. Well, that is what many folks are doing on the NSE today. Paying for something that is worthless and even fighting over it.

Now, majority of players on the NSE are just speculators looking for quick bucks. Who cares if the company has closed down or does not have a known address? I will sell to another 'mugu' once the stock price has risen by 50%.

In my view the market is still high as there are very few companies with a PE ratio of less than 20. Infact when u look at the dividend yield u would be discouraged further. Most companies have a dividend yield of less than 2%. The market average is 1.72 based on FSDH report after adjusting for comapnies who have not paid a dividend in the last accounting year. There are therefore very few good buy opportunities despite the recent correction.

Frankly the only stock i will put my money on right now is UBA. I think it is fairly valued and the forward PE at current price is about 16.

The lesson to be learnt is invest only in companies with good fundmentals. They are the ones u can stick with through a bull or bear run.

I recall the market correction in the 4th quarter of 1997. The likes of Unilever fell from N27 to 9, and PZ from 40+ to 20+. PZ has never reached such highs.

[oseitutu]

When markets crash, it is only the ones with strong backbone that survive. Having said that, even they also suffer. No company is exempt in a market crash, none.

[olusolakemmy]

I wanted to reply to the fellow that said 70% of his investment is in the nse, and also asked for what to do?????????????
broda, dont panic but remember that even a blind man or the man without leg do not have an excuse not to find an escape route in the war that has been announced 20yrs ago!

Seriously, i will strongly suggest that everyone of us review our portfolio, how many junk stocks do u have in there?
what were your aim when u bought those stock?
without sentiment, do your self a favour of doing the right thing with those stocks!!!!!!!!!!!!!!

on a lighter note, our market is still pretty young to crash!!!!!!!!!!!

[Yusuf]

Originally Posted by olusolakemmy

I wanted to reply to the fellow that said 70% of his investment is in the nse, and also asked for what to do?????????????
broda, dont panic but remember that even a blind man or the man without leg do not have an excuse not to find an escape route in the war that has been announced 20yrs ago!

Seriously, i will strongly suggest that everyone of us review our portfolio, how many junk stocks do u have in there?
what were your aim when u bought those stock?
without sentiment, do your self a favour of doing the right thing with those stocks!!!!!!!!!!!!!!

on a lighter note, our market is still pretty young to crash!!!!!!!!!!!

A friend on this forum sent this to me and I think it makes sense to share it with people who have not seen it. This is very correct for those our speculative stocks that we know nothing about.

Short Story...

Once upon a time in a village, a man appeared and
announced to the villagers that he would buy monkeys
for =N=10.
The villagers seeing that there were many monkeys
around, went out to the forest and started catching
them.
The man bought thousands at =N=10 and as supply
started to diminish, the villagers stopped their
effort. He further announced that he would now buy at
=N=20. This renewed the efforts of the villagers and
they started catching monkeys again.
Soon the supply diminished even further and people
started going back to their farms.
The offer rate increased to =N=25 and the supply of
monkeys became so little that it was an effort to even
see a monkey, let alone catch it!
The man now announced that he would buy monkeys at
=N=50! However, since he had to go to the city on some
business, his assistant would now buy on behalf of
him.
In the absence of the man, the assistant told the
villagers. Look at all these monkeys in the big cage
that the man has collected. I will sell them to you at
=N=35 and when the man returns from the city, you can
sell it to him for =N=50."
The villagers squeezed up with all their savings and
bought all the monkeys.
Then they never saw the man nor his assistant, only
monkeys everywhere!!!
Welcome to the "Stock" Market!!!!!

[zainabusman]

Originally Posted by Yusuf

A friend on this forum sent this to me and I think it makes sense to share it with people who have not seen it. This is very correct for those our speculative stocks that we know nothing about.

Short Story...

Once upon a time in a village, a man appeared and
announced to the villagers that he would buy monkeys
for =N=10.
The villagers seeing that there were many monkeys
around, went out to the forest and started catching
them.
The man bought thousands at =N=10 and as supply
started to diminish, the villagers stopped their
effort. He further announced that he would now buy at
=N=20. This renewed the efforts of the villagers and
they started catching monkeys again.
Soon the supply diminished even further and people
started going back to their farms.
The offer rate increased to =N=25 and the supply of
monkeys became so little that it was an effort to even
see a monkey, let alone catch it!
The man now announced that he would buy monkeys at
=N=50! However, since he had to go to the city on some
business, his assistant would now buy on behalf of
him.
In the absence of the man, the assistant told the
villagers. Look at all these monkeys in the big cage
that the man has collected. I will sell them to you at
=N=35 and when the man returns from the city, you can
sell it to him for =N=50."
The villagers squeezed up with all their savings and
bought all the monkeys.
Then they never saw the man nor his assistant, only
monkeys everywhere!!!
Welcome to the "Stock" Market!!!!!

Nice one! I hope lessons will be learnt 4 the future.

[knightofdelta]

Originally Posted by pumping

I'm really surprised that after all said and done, they have said they cannot see any of the signs below on the NSE!! Let me mark the ones that are alread prevalent.
----------------------------------------------------
• High valuation level - We can see this with many penny stocks

• Dividend yield falling below 5% - Yes, for most stocks

• Widespread bullishness - Yes, all year till recent bear run

• Belief that present scenario is different and history will not repeat
itself this time.

• Trumpeting enormous gains to be made in the stock market by
professionals and media - Even the NSE is doing this.• Rising interest rate - Interest rate was just raised to curb inflation

• Stocks no longer reacting positively to strong earnings - The banks are a very good case in point. Instead stocks of companies announcing losses make maximum gains.

• Traded volume expanding significantly

• Excessive speculation among low price stocks. - Penny stock syndrome is very much here

• Breakdown/weakening of a large number of blue chip stocks

• Market unable to move higher despite increasing volume
-----
These ones are very much with us on the NSE.

After all said and done. I will agree that the stock market have most of the indices that can make it topple at anytime. I read through the article and there was a caveat at the end that if only one out of all the indices is absent, then the market crash is not imminent.

1. The market has been able to move higher with increasing volume

2. The blue chip stocks like Nestle, ETI, are still holding on their own and are not breaking down just yet.

3. Stocks are still reacting positively to strong earnings as in the case of Oceanic bank... despite the large volume of shares available, there has been a serious price increase since yesterday when the results hit the floor.

Well, I have been able to count three indices out of the criteria that herald an imminent market crash. Theoretically, the market is not likely to crash anytime soon though a market correction can occur at anytime.

The Knight of Delta.

[pumping]

Is anyone still debating that the market has crashed? I don't need any more proof in my case. The market has lost enough to qualify for a crash even with only 5% loss possible in a day. Now, no one wants to buy stocks that being chased at double the current price just 4 months ago.

[zainabusman]

Originally Posted by pumping

Is anyone still debating that the market has crashed? I don't need any more proof in my case. The market has lost enough to qualify for a crash even with only 5% loss possible in a day. Now, no one wants to buy stocks that being chased at double the current price just 4 months ago.

I think that debate is over. I believe a lot of us will be amused when we read our posts a few months back on whether the market was ripe for a fall or not.

[olusolakemmy]

Originally Posted by zainabusman

I think that debate is over. I believe a lot of us will be amused when we read our posts a few months back on whether the market was ripe for a fall or not.

yes o

one of my good friends also said that Now he knows better!!!!!!!!!!

from the post in this thread, it shows that many of us expected the turn of event but were not sure of the timing and yet we all stay put and see good percentage of either our initial investment or profit to go with the correction/crash!!!!!!!!

but the question, can things get worse?

can we actualy identify or give differentials on the possible causes of the severe correction?

[rabbi De oracle]

stock market crash is very possible in nigeria when the economy starts collapsing like that of the US and that will happen if and only if all nigerians are into the stock market......surprisingly,the figures we have is that less than 10% are into stock and so it can't collapse:-)

most of the companies are doing fine and having nice quarterly results. though it doesn't correspond with the prices of their stock in the market. this variation is due to policies enacted by government(...like the uniform year end thing),money movement away from the stock market (thru forex,private Placement) and herd movement(investors selling of from little news heard) and a very small percentage to betting on stocks(just for the big boys). and as u can see, these are not due to non-perfromance or malpratice of the company.

When all these are tackled with appropriate policies,regulations and checks, only the patient will dine big. as the saying goes, a patient dog eats the fattest bone but right now relax and eat no bone. it is just a matter of time.

as for the guy that has 70% of his investment in stock. u need to define wht u want.

do u want ur income from stocks or
do u want to build fortune from stock by being vigilant.

if u want ur income from stock,then it means that when the bears come strolling,u will not be happy at all and u may be forced to sell.and when the bulls show,u will regret it. the greatest regret u have is when u have 1,000,000 units of a stock bought @ N1 and cos of the bears u sell off at N0.20 to limit ur loss. and after 2months of patience the price starts inching up and the patient then sells off at N5.

just try and calculate the gain u would have made for not being patient..

..........Patience is a Virtue

if u are in the 2nd category of building fortune, then u will have to wait and be patient.the market will never crash. probably u may have been begging GOd to make u rich thru ur prayer, I believe God has answered ur prayers. He sent the bears to clear ways for the bulls. buy all u can buy now.most especially the low stocks. and u will see wht u will earn.