When the indices of corporate performance on the Nigerian stock Exchange (The All Share Index and market capitalisation which measures the movement of share prices), began an upward movement mid last month, investors heaved a sigh of relief, having experienced a long period of the dominance of the bears, which lasted for about 12 months.
To some investors, who had waited for months for the stock market to rebound, it was good news as part of the monies perceived to be lost in the stock meltdown came back somehow.
Indeed, the ASI has gained 24.1 per cent in the past month, while the make capitalisation rose in tandem.
Signs of a market rebound became manifest mid last month when at the close of business on April 17, 2009, the All-Share Index which measure the movement of share prices rose by 0.35 per cent to close at 19,983.09 points, while market capitalisation closed slightly higher at N4.52tn, and the NSE- 30 index rose by 1.2 per cent to close at 655.39 points.
The trend continued in the week ended April 24, 2009 when the ASI rose by 7.4 per cent to close at 2,455.92 points, with market capitalisation closing at 21,455.92 points while market capitalisation of the 200 First - tier equities closed higher at N4.87tn, and the NSE- 30 index rose by 8.9 per cent to close at 713.49 points.
By the week ended April 30, the index rose by 0.16 per cent to close at 21.491.11 points, while market capitalisation closed higher at N4.88tn.
The week ended May 8, 2009 brought more succour to investors as the index rose by 9.42 per cent to close at 23,516.26 points, while market capitalisation rose further to close at N5.34tn, and the NSE-30 index rose by 12.2 per cent to close at 815.08 points.
It was another bullish week ended May 15 as the ASI rose by 5.44 per cent to close last Friday at 24,796.42 points, while market capitalization closed higher at N5.63tn, and the NSE - 30 index rose by 2.7 per cent to close at 837.31 points.
Also last month, a review of the stock market showed that investors are renewing interest in stocks as the Nigerian stock market witnessed improvement in the level of activities. For instance, for the third consecutive month, turnover volume and value rose in April to 7.96 billion shares valued at N42.4bn in 121,940 deals, up from 7.8 billion shares traded in 131,419 deals in March.
Discerning investors are, however, concerned about the sustainability of the performance of the market currently.
Investigation showed that the sustainability of the bull run was hinged on several factors which included positive signals from the government, especially on its pronouncement about the markets; its macro economic policies; investors? willingness to take profit from capital appreciation, and sustenance of the renewed confidence of investors, which stockbrokers said is even more important than liquidity in the market.
For instance, while stating that the corporate returns on investment and good results posted by quoted companies was partly responsible for the bullish trend currently being experienced, the Assistant General Manager of the Nigerian stock Exchange, Mr. Sola Oni said: ?The sustainability of the current trend would be determined by many factors, which include conclusive operating climate for listed companies post listing requirements, and investors readiness to appreciate that the capital market is not for short term.?
Still on the sustainability of the trend, a senior stockbroker, Mr. Emmanuel Ohanwusi of Vision Trust Securities, said, ?It will be sustained for sometime because investors have suffered major losses. As far as people do not panic. It is confidence we need and not really liquidity.
?Government should also desist from making political statements that tend to undermine the growth of the markets. If it does not have an answer to any problem, they should give the impression that they are looking into it, rather than saying it is not a problem or that they will not attend to it.
The immediate past President of the Chartered Institute of Stockbrokers, Mr. Oladipo Aina, however, posited that the bullish trend may not be sustainable in the short run as panic selling by some investors is still expected. He however, noted that the market was on the path of quick recovery, and this had come even earlier than what some experts predicted earlier.
He said, ?The activities of the last few weeks have been encouraging, and it is an indication that for investors, confidence is returning to the market. However, we have to be a bit vigilant, because we expert some people may want to take profit.
That will happen for sometime because people have been bruised in the past. We expert panic selling for a while, but overall, we are happy that activity is returning to the market. I personally believe that the market will recover faster than I earlier predicted. I had predicated 18 months, but certainly it is going to be earlier. It is not that we have more liquidity now than before, but confidence is gradually returning.
Oni and Aina also said that the recent intervention of regulators with the banks as regards the margin facilities granted stock broking firms, which has given a reprieve to the stock broking firms and banks was also responsible for lifting the market.
Another factor is the good corporate results released by quoted companies and proposed dividend and bonus issues which is eliciting investors, interest in their stocks.
For instance, in the financial year ended December 31, 2008, Guaranty Trust Bank Plc posted an after tax profit of N28.3bn, up from N21.2bn in 2007. The board has proposed a dividend of N1 per share and a bonus of one for four.
Mobil Oil Nigeria also recorded a profit of N1.719bn in 2008 over N1.31bn in 2007, and its board of directors have recommended N5 dividend per share.
Zenith Bank Plc has also disclosed its intention to give an intention bonus of one for every two existing shares, on its first quarter result ended March 31, 2009.
By the results, the bank?s gross, earnings rose from N91.5bn in the same period in 2008 to N109.7bn in the review period and an after tax profit which rose from N16.9bn to N20.3bn.
These results among others, according to stockbrokers and the Nigerian Stock Exchange was largely responsible for the bullish trends as it reinforces the impression that the fundamentals of the quoted companies are strong.
On why the bulls staged a come back, Oni said; ?The current trend in the last four weeks has confirmed our belief that our market is resilient and its fundamentals remain strong.
Investors are currently experiencing impressive corporate earnings as typified by robust dividend payment and generous bonuses by listed companies. This trend is fast eliciting demand for the companies? shares as investors want to take advantage of those returns.
?The Exchange as an organization has also continued to improve on the quality of listed companies reporting style. For instance, the Exchange has fully enforced the need for listed companies to make forecast as a way of enabling both existing and potential investors to understand the companies, and encouraged foreign investors including hedge funds which seldom trade their stocks to invest.?
For Aina, market rebound is an indication that investors are showing more interest in the market.
He said. ?The market has corrected itself up to a point. Last year, at the peak of the market many companies had double or triple digit price earnings ratios, which indicates the number of years it would take for investors to recoup their investment, but if you look at it from the beginning of this year, some have dropped to single digits. As at March last year most of them were double digits.
?Generally, people convinced that the market was good enough for them to return to, so that they will have good bargain. The results of companies coming to the market recently have also been quite encouraging.
?We were also told that some banks would restructure their margin loans. So we expect that banks will free some credit when the loans are restructured.?