Major operators in the capital market have allayed fears over the recent decline in share prices at the Nigerian Stock Exchange (NSE), assuring that the fundamentals of the market remain strong.
The Chartered Institute of Stockbrokers (CIS) and Association of Stockbroking Houses of Nigeria (ASHON) assured investors of safety of their investments, noting that the depression was a temporary dip in the price cycle.
They said the performance of quoted companies on the Exchange has been satisfactory and the current downswing was due to the general lull in the economy and other exogenous factors prompting both domestic and foreign investors to convert their shares to cash.
They pointed out that the market remained undervalued; hence, investors have greater chances of higher returns when the situation becomes more stable.
Chartered Institute of Stockbrokers (CIS) President, Mr. Adedapo Adekoje, attributed the bearish trend to panic sales by foreign portfolio investors, who are taking advantage of emerging higher returns on mutual funds in the United States (US) and Europe, leading to massive sale of their shares on the NSE.
“Information about mutual funds in America and Europe that are giving five per cent return on investment (ROI) is attractive to foreign portfolio investors and they are offloading shares to take advantage of the investment opportunity. They are more comfortable with the new returns on mutual funds. The good news is that we are having good valuations. Investors should buy on long term basis and not short term,” Adekoje said.
He urged the government to initiate policies that would enable the Pension Fund Administrations (PFAs) to increase their investments in the market.
President, Association of Stockbroking Houses of Nigeria (ASHON), Mr. Patrick Ezeagu, said nothing was wrong with the Exchange in terms of governance structure, technology and compliance with the rules and regulations by stockbrokers.
He noted that the quoted companies are also not doing badly when viewed against the general lull in the economy.
“The Federal Government should intensify efforts in addressing security problems in Nigeria and keep on reassuring of a safe investment environment. Our market is full of opportunities but we need to sustain the momentum of assuring both indigenous and foreign investors that the market is safe,” Ezeagu said.
According to him, the Exchange is a barometer that gauges the mood of the economy. Therefore, there is need to address investors’ fears in order to enable them take advantage of good returns associated with the market.