With the current state of the nation’s capital market, it is obvious that retail investors are still yet to recover from the market crash of 2008.
The aftermath of the meltdown saw the nation’s capital market lose huge funds, as the Nigerian Exchange’s All-Share Index fell from a height of 66,000 basis points in March 2008 to less than 22,000 points by January 2009.
Also, over N9 trillion or 70% of the total market capitalisation of the exchange was wiped out during the meltdown, following a massive exodus of both foreign and domestic investors from the equities market.
Pullback in prices: In the current year, some factors have contributed to the pullback in equity prices. For instance, pre-election political activities have increased the level of political risk, thereby fuelling the sell-down motive of both local and foreign investors. This is in addition to the normal asset liquidations (sell-off of both equities and real estate) by politicians during pre-election years to fund their electoral campaigns.
Also, the last interest rate hikes by CBN coupled with inflationary pressure have caused so much disruption to the market, as market analysts believed it was responsible for the prolonged repricing of securities across markets and instruments, including loans and advances by banks.
Buying opportunities: While most investors are fidgeting as asset prices plummet, those with a cool head can see the resulting low prices as a buying opportunity. Often, fear drives asset prices well below their fundamental or intrinsic values, rewarding patient investors who allow prices to revert to their expected levels.
Market analysts said the equities market presents attractive opportunities for investors in the form of capital appreciation and dividend return, given the low yield environment in the fixed-income space.
Also, the stocks are still currently at a low level and present an opportunity for growth in the short to medium term. That’s why stakeholders believe this is the right time to take a position on some quoted stocks that have strong fundamentals.
The current low prices of stocks present investors opportunity to respond to expert advice that what investors need to do to reposition in the face of losses in the prices of shares was to invest in the market despite recurrent losses in the recent time to gain in the long run.
Market operators’ advice: Financial analysts called on domestic investors in the nation’s capital market to leverage on the current low prices of stocks of companies quoted on the floor of the Exchange for future gains.
Mr Tajudeen Olayinka, Chief Executive Office, Wyoming Capital and Partners speaking to Nairametrics Tajudeen said prices are generally low and attractive at this time but the desire to pick stocks at current low prices should be reserved for investors who can afford to hold securities on a long term basis because of unpredictable volatility that could arise from possible headwinds.
The Managing Director of Crane Securities Limited, Mr. Mike Eze, also in a chat with Nairametrics said the market was ripe for investment going by the current low prices of stocks.
Eze noted that it was obvious that activities would stabilise in the market after the general elections, adding that this was the perfect opportunity for investors to stake their funds in the market. “This is the right time for investors to take part in the equities market, with the prices of shares at their lowest levels. Brokers are confident that after the elections, the market would begin to stabilise and investors would begin to record significant appreciation on their investments.
- “Because with the little number of funds you will buy a large number of penny stocks or low-price stocks, and that enhances your position as a shareholder. If dividends are declared by such companies, the shareholder will earn a sumptuous dividend.
- “The likelihood of being adopted as a director of the company is also guaranteed. But with highly capitalised stocks, investors may use an enormous amount of funds to buy a little quantity and when dividends are declared, the take home will not be appreciable and then you cannot think of any appointment as a result of your shareholding,” he said.
Kasimu Garba Kurfi, Chief Executive Officer and Managing Director, APT Securities and Funds Limited advised investors especially local investors to take advantage of the current low prices of stocks before foreign investors are expected to show interest after the elections start taking positions.
- “The prices are very low, the advantage is to invest now, and the earlier local investors take a position the better before foreign investors start taking positions after the 2023 elections. It is expected that when a new government comes on board, foreign investors will be attracted to the market and most of the stocks currently trading below the par value will go up,” he said.
The Managing Director/Chief Executive Officer of Cowry Asset Management Limited, Mr Johnson Chukwu, agreed that when assets were down, those with the resources could leverage the market. He said:
- “When asset prices are down, people who have the resources should go in. It is just a market panic we are witnessing as a result of the war in Ukraine, and the war will not be there forever. It is just a logical thing that anybody who has the right advice and resources should go in and buy.”
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