Rain is a blessing but not the kind of rain that used to fall in Lagos causing flood and carrying people’s wives away.
The impending rain that will come will most likely flood the NGX leading to weeping and sighing even as we continue to celebrate the ASI climb into uncharted territories.
As at close of business on Friday, it had crossed the 100,000-mark closing at 102,401.88 leading capital Market Illiterate Bayo Ononuga looking for anything to bolster the credentials of the Government latching onto it to gloat as to how Government policies were driving very succinctly the stock market to record phenomenal heights.
It is performances like this that made my highly revered senior Segun Adeniyi refer to it as the Stockfish market. A market that does not in any way reflect the ongoing economic realities.
They told us as rookie stockbrokers that the market is a barometer to gauge macro-economic performance, but this one is a barometer for itself.
It is just measuring its performance without even seeing what is happening outside its building.
The stock market is just dancing to its tune and running wild with very spurious results that have blinded those who profiteer on it to the inevitable crash that should happen in a matter of weeks.
I woke up the other day to a result posted by Guinness the brewery giant, if we can still call them that. N5b loss for the year ended Dec 2023 due to forex challenges.
Same day ASI moved northwards. This one is like a car that the fuel gauge does spoil, I swear. When the tank is empty and the thing is still showing you the full tank.
The fear and rightly so is that by March when first-quarter results would be released, there will be blood on the dance floor as shareholders will weep more than the children of Israel in the wilderness, and guess what, the ASI will still go up.
Do you know why, it’s very simple. Just take a look at the stocks that have crossed the trillion Naira Capitalisation and you will notice something in common.
Let’s list them mbok, Dangote, BUA Foods, BUA Cement, Airtel Africa, MTN, Seplat, Transcorp, Geregu, Zenith GTB, UBA, Access, you will notice something.
Most of them don’t have floats in the market. The majority of the shares are being held by institutional investors with direct links to their promoters hence the scarcity of their shares on the market and when there is scarcity, the price goes up.
This is the simple reason why the ASI will continue to go up despite the economy. These are large-cap stocks whose price movements impact the ASI significantly.
Another thing you will notice is that 40% of them are financial institutions and if you look at their books very well, you will see that revenue is driven by forex-backed speculations and trading.
Simple, so you will now understand why I call Bayo Ononuga a market illiterate, cos all he sees is the ASI arrow, pointing northward without understanding the main reason behind it.
The market is obtuse, captured by a few Oligarchs who will now use their share prices to maintain Forbes positioning or any other funny categorization without it reflecting in real terms on the economy and some cases on their shareholders.
It is for this reason, that it’s time to instil very robust reforms in the market. The need to have Government policy-driven listings, waivers and incentives to push serious players in the new economy like tech players, has now become more than ever before very imperative.
This is so because the NGX will need to block the holes that emerge as a result of the delisting epidemic that seems to have engulfed it with such delisting of firms like GSK and the many more we expect after March.
The only silver lining in all of these is that the NGX has finally secured in their leadership, the most frontal and well-qualified professionals who remain quite clear as to their purposes.
The Group Board led by my brother Alhaji Kwairanga ably supported by two of the most brilliant market operators that I have ever encountered – Nonso Okpala and Mohammed Garuba ably complemented by such well-tested young Professionals like Temi Popoola, Ahonsi Unuigbe and Tony Ibeziakor whose brilliance continues to marvel watchers, I am very sure that the right things would soon be done to correct the Kwashikor market.
All hands must therefore be on deck to stare at the monster of market insensitivity, wrestle it down and reconnect it to the realities of the macroeconomic environment.
This is very key if the market will return to its historical role of being a worthy barometer of economic performance instead of what it is right now – a place where stockfish is sold to the public.
You called Bayo a capital market illiterate and yet you that is literate do not even know that the high activities leading in the market has increased taxes to the government.. as for the banks, do yourself good by dissecting their financial reports and remove their forex gains and they are still in profits. Beside from their huge profits declared, there are taxes accrued to the economy..
I do not expect the economy to simply react to the stock market booze immediately. It takes time and it’s just a sign of what the future holds. I do not like pessimists.
@ John
Am shocked that you didn’t see the bigger picture as captured in his write-up but rather see him as being pessimistic. This write-up sums up the entire scenario of market. The performance of the market is in variance with the macro economy and the write-up is an alarm bell for those that have ears………March/April will be here soon…we will all come back to this write-up!!
If you understand the stock market very well, you will know that it’s not a straight line growth. I have made a lot from the market and i am praying for prices to deep so i can re-enter.
every year around March/April after Annual reports are out and when dividends are being announced, investors re-balance their portfolios. Prices usually go down after dividend qualifications. so it has nothing to do with his write-ups. It’s a normal cycle
Whenever prices go up, investors make money. When prices go down, investors have opportunity to enter at bargain prices to make money.
In all of these, money will be made.
Bull makes money, Bears make money but the pigs get slaughtered.
I found the article quite informative but I do not support the name calling.
Reading the article with open mind will reveal to you that the market is not reflecting the underlying economic conditions that impact the market.
As a matter of fact, this was the reason why I lost interest in investing/trading in NGX.
There are market forces that needs to be addressed so that the NGX will serve as a perfect barometer for what is happening in the Nigerian economy.
If you would tell yourself the truth, you will know that the Nigerian economy is in a serious distress as a result of Naira devaluation, forex scarcity, and inflation; buy the NGX is not reflecting these realities.
These are my humble submissions.
Thank you!
Well articulated… Especially the Market illiterate adjective… I hope it’s just a sarcasm.
Of course, there would be market correction when investors start raking in dividends, so it’s not much of a difficult prediction. But I still think most of the shares including those of loss making but solid companies like Guinness are trading around where they should be, going by the huge naira devaluation of the past year which is expected to have shot up the book value of their assets acquired during times of much stronger naira.
Olu,
It’s not space science, whenever fuel subsidy is removed in any economy, it results in increase in general price level of which stock prices are not exempted. Yes market correction is inevitable but it will be absorbed buy the same market.
Of course the market is NOT reflecting the wider macro economy because only the less than 200 companies listed on the NGX constitute a MINISCULE percentage of the economy!