Govt’s Measures Instill Confidence In Stock Market

[TGD]

 THE illiquidity in the economy notwithstanding, the coming on board of President Goodluck Jonathan's cabinet has geared up speculative buying of the shares of blue chip firms at the stock market by discerning investors, who want to take advantage of the current low prices of shares whose value had been eroded by the long-drawn bearish trend in the market since the beginning of the second quarter. The rush for the cheap shares attracted the bears, last week, causing the All-share Index to appreciate for the first time this quarter by 93.58 points or 0.4 per cent to close on Friday at 23,925.72. The market capitalisation increased to N7.649 trillion.

The NSE-30 Index also appreciated by 8.82 points or 0.84 per cent to close at 1,069.31. Last week, All-Share Index and NSE-30 depreciated by 2 per cent and 2.1 per cent respectively

All the four sectorial indices appreciated too compared with the preceding week in which all them depreciated. Food & beverage went up by 12.94 points or 1.65 per cent to close at 797.47, banking appreciated by 8.92 points or 2.6 per cent to close at 356.18. Insurance rose by 0.99 points or 0.7 per cent to close at 159.19 and oil/gas appreciated by 5.62 points or 1.95 per cent to close at 293.24.

Godwin Ashikordi, Chief Executive Officer, Artmark Global Resources Limited, a Lagos-based stock broking firm, who confirmed that prices of highly capitalised stocks had declined due to excessive supply occasioned by investors' quest for funds to cushion the harsh effects of illiquidity in the system said the upsurge in the demand for shares last week was due to speculative mopping up of the current cheap shares of blue chip firms.

He said: "The market responds to the cash situation in the economy. When people have money the demand for goods and services will increase. When there is low liquidity, demand will shrink. This was what happened in the stock market till two weeks ago. The scarcity of funds was due to government not executing projects. This made the entire economy to be experiencing illiquidity. People, who needed money to meet urgent needs and who had shares to sell to raise the money, were offering them for sale and this greatly brought down the prices of most shares."

The CEO of Anchoria Securities and Investment Limited, Chief Olusola Dada explained that foreign portfolio investors, who were waiting to see the economic direction of the new administration also contributed to the dumping of shares.

Another stockbroker, who pleaded anonymity, said investors, especially foreign fund managers, who were worried by Jonathan's delay to announce his cabinet members also traded off their shares because of the fears of the unknown even though earnings of companies in the country have been rising.

Bulls' resurgence, last week, was a confirmation of investors' rekindled confidence in the economy because of the newly announced cabinet by President Jonathan.



The Guardian