Stock Market Investors Lost N1.6trn In 2015 | Independent Newspapers Limited
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Stock Market Investors Lost N1.6trn In 2015

Posted: Jan 1, 2016 at 11:00 am   /   by   /   comments (0)

The Nigerian Stock Exchange (NSE), which stepped into 2015 on an unfavourable note with key measurement indicators tilting southwards, finished the year with a loss of N1.627 trillion.

This is despite the fact that the last two days of the year witnessed an unprecedented bullish rally with a gain of N649 billion. Expectations by some market analysts, that the 2015 general elections and subsequent smooth handover to a new government would drive investor optimism to galvanise stock market activities during the year, was dashed.

Available statistics gathered by New Telegraph show that activities at the market, which opened the trading year high at N11.477 trillion in market capitalisation and 34,657.15 in index at the beginning of trading on January 2, 2015 closed the year yesterday at N9.850 trillion and 28,642.25 index points, earning a year to date loss of about N1.627 trillion or 17.35 per cent year to date.

The Chief Executive Officer of NSE, Mr. Oscar Onyema, who recently gave insight into challenges being faced by the stock market, said that the Nigerian capital market was not the only exchange affected by the global development. Onyema noted that of all the 24 exchanges in Africa, 20 experienced downturn, adding that stock market was reflective of the economy. According to him the economy, towards the end of last year, faced significant shots from crude oil prices and that has impacted the foreign exchange rate and created uncertainties in the market place.

“As you know, investors do not like uncertainties and as we begin to remove the uncertainties around exchange rate, around economic policies, you will see investors being able to appropriately react to the removal of these uncertainties.

That is the feedback that we are getting from investors,” Onyema said. Speaking on the reverberating effect of the crumbling economy in China on the global markets, Onyema said: “As you know, we are living in a hyper-connected world; a world where shocks in one region end up manifesting themselves in another region.

We’ve seen a slight slowdown in China and two currency devaluation that have sent some shocks.” Onyema said investors would begin to react positively if the grey areas in economy are removed. Reviewing the state of the market, some operators blamed the downturn on the state of political, economic and financial situations in the country. The Managing Director/ CEO of Capital Bancorp Plc., Mr. Aigboje Higo, said that the economic situation had affected the stock market, adding that the foreign exchange market was a factor that affects the market.

On his part, the Managing Director, Financial Derivatives Company (FDC) Limited, Mr. Bismark Rewane, said that the decision of the Monetary Policy Committee of the Central Bank of Nigeria (CBN) to reduce the interest rate on the Monetary Policy Rate (MPR) and the Cash Reserve Requirement (CRR) would lift the share prices of stocks.

Rewane said that through lower debt expenses, estimated amount of future cash flows would rise, leading to company’s stock price appreciation. Rewane said that the stock price of most companies provided attractive entry points, adding that the situation could alter the market secular bearish trend. He noted that the recent CBN policy signalled bullish credit expansion, lower yields on government securities and would see a reshuffle in asset classes, which might favour equity.

“The ease in monetary policy stance and the stimulus package of the government is expected to reflate the economy, thus impacting positively on corporate earnings,” he said.

On currency depreciation, he said movement in currency was perceived to increase demand of company’s stock by foreign investors. Rewane noted that in nominal terms, revenue would increase, though firms with foreign obligation would see an increase in expenses, thereby having an impact on company’s stock prices.

He, however, said that the 2016 budget would act as a pointer to market participants on government’s policy direction alongside firms that will benefit from it.