Capital market analysts have said that the significant increases in stock market prices experienced and the subsequent gains garnered by players in the Nigerian stock market in the last few months have boosted investor confidence.

Stock prices on the Nigerian Stock Exchange were said to have recorded 20.4 per cent returns in the third quarter of this year, with market indicators rising to 32 per cent. According to analysts, the development has the potential to lure investors back to the market.

“The market is returning to the confidence level,” the Chief Executive Officer Maxifund Investments and Securities Limited, Mr. Okechukwu Unegbu, said after trading on Monday.

“Though it is not fully there yet, we have a situation where many people are coming back”, he added.”

Unegbu said though some stocks shed weight on Monday, there was no cause for alarm.

“I expect that by midweek most of the stocks would start picking up,” he said, adding that with stocks whose results were already out showing strong fundamentals, people would be attracted to them.

Unegbu, who explained that the stock market was still dominated by foreign investors as Nigerian retail investors had yet to recover from the recession, urged people to invest in stocks as they equities were still underpriced.

A stock broker for Compass Investments and Securities Limited, Sam Ndata, agreed that investor confidence was already improving.

He said the returns recorded by the NSE in the third quarter were as a result of the return of confidence to the market and efforts made by the management of the NSE, among other things.

Like Unegbu, Ndata said that the investor level had yet to get to the desired level.

“They (investors) have not fully come back; they are only coming back gradually,” he said.

Concerning the outlook for the week, Unegbu said, “Profit-taking is a factor”, as he agreed with analysts who had predicted that investors might cash in on the gains recorded in the rising stock prices within the week. He, however, said there were many other considerations, besides profit-taking, that are driving the stocks at the moment.

Asked if profit-taking was already dominating trading (as at Monday), Ndata said, “Many brokers have not contacted their clients and the clients have not given them orders to either buy or sell. As from tomorrow (Tuesday), when they might have made contacts, we can start getting a picture of what the week will be like. What people are executing today are the previous orders they have not exhausted.”

With the returns of 20.4 per cent recorded by the NSE in Q3, the quarter remains the best in terms of the Exchange’s performance since December 2008. However, some analysts believe that the gains in the stock market are not sustainable.

But Unegbu was optimistic, “I am very optimistic that the trend is sustainable, even if it is not going to suffice, because I believe that from the work being done by most of us now and the management of the Exchange, more investors will return,” he said.

At its third quarter press briefing on the economy, the Lagos Chamber of Commerce and Industry had said, “The recovery (of the stock market) is supported by improved corporate earnings, despite the tough operating environment.”

It added that the commencement of market making activities with 25 blue chip stocks and the renewed confidence in the capital market by foreign investors also played key roles.

Source: Punch (written by Simon Ejembi)