By Gbenga Agbana   Thursday, 23 Sep 2010

 

Despite the expiration of the deadline given to banks by the Central Bank of Nigeria to reduce their exposure to the capital market to 10 per cent, which resulted in massive sell-off recently, the bears are still dominating in the stock market.

The indices of corporate performance on the NSE, the Allshare Index and market capitalisation, which had erased the 34 per cent loss recorded last year in the first quarter, had fallen significantly at the end of trading on Wednesday.

 

The index closed at 22,771.69 points, while market capitalisation closed at N5.58tn. The market capitalisation had opened the year at N4.99tn, while the ASI opened 20,827.17 points.

 

As at Tuesday, the return on the ASI year-to-date was 9.74 per cent, while that of market capitalisation stood at 12.25 per cent.

 

Some market operators had predicted that the selling pressure would subside after the September 1, 2010 deadline, but experts who spoke with our correspondent said the dominance of the bears was attributable to illiquidity in the system.

 

They also added that the foreign portfolio investors were no longer showing interest in the Nigerian stock market due to the value of the naira.

 

They also noted that the pension fund administrators were no longer investing in stocks, since they now preferred government bonds, which gave them constant returns.

 

Other operators said the government was not spending enough and was not even concerned about the growth of the economy.

 

For instance, the Managing Director of Vetiva Capital Management Limited, Mr. Chuka Eseka, said, ”It has to do with the liquidity in the system. Banks are not lending and the market is no longer a key attraction. The banks have to resume lending. The banks are no longer providing security. Foreign investors are scared because the naira is being devalued. If you invest $100 and what you get as return is $50, you will be discouraged.

 

“The foreign portfolio investors are no longer investing in stocks. People now trade in short term instruments and some tend to invest in their own businesses. It is not an issue of sell-offs. PFAs no longer invest in the stock market. They now invest in the bond market.”

 

To the Managing Director of GTI Capital Limited, Mr. Abubakar Lawal, the government is not doing much about the growth of the economy, which is affecting the stock market.

 

He said, ”The capital market mirrors the performance of the economy. The government is not doing much about the growth of the economy. All they do is politicking. The government is not spending, so the economy is not recording the required growth and that is why the stock market is not growing.”

 

Corroborating the views of Abubakar, an investment analyst, Mr. Nornah Awoh, said, “Government is not spending money.”

Source: Punch