Key highlights
- Stockbrokers are currently reaching out to retail investors aggressively to woo them back with the incentive of a good return on investments.
- Uncertainties around political cycles are making foreign investors more careful in taking a position in the local bourse leaving domestic investors to be the only solution to the market
- Following negative sentiment witnessed in the market on Monday, the year-to-date (YTD) return dipped to 1.37%, while the market capitalization shed N569.12 billion to close at N28.30 trillion.
Nigerian stockbrokers are currently into advocacy aimed at bringing back retail investors that were hard hit by the harsh economic condition aggravated by the cashless policy of the monetary authority.
The retail investor’s apathy to the Nigerian stocks are forcing stockbrokers to intensify marketing to get more investors back in the market as the harsh economic situation has pushed potential investors to adopt the habit of survival first before investing in the market.
Nairametrics gathered that brokers are aggressively reaching out to retail investors to woo them back with the incentive of a good return on investments.
Harsh economic environment
The Managing Director of Crane Securities Limited, Mr. Mike Eze in a chat with Nairametrics said the apathy is based on the general economic situation which was heightened by the cash swap policy of the monetary authority.
According to Eze, the situation led retail investors to start thinking of survival first before investments, especially in stocks.
- “One has to be alive before thinking of investments; the harsh economic environment heightened the apathy of this class of investors. Wholesale investors shifted their attention to the fixed-income market, and this is a bit detached from retail investors because of the large amount required by the fixed-income segment.
- “Currently operators are in the field reaching out to retail investors to return to the market which is promising now because the prices of stocks are low and offer them the opportunity to reap higher capital gains. They are in the field with the incentive of a higher return on investments, by the end of this quarter which ends on June, investors of stocks with good fundamentals are likely to have a return of 45% on their investments,” Eze said.
Eze noted that there has been a drop in the volume of trade on the NGX but that the turnover has been high despite the decline in volume occasioned by the reduction in foreign portfolio investments.
The market crash of 2008/2009
The Managing Director/Chief Economist at Analysts Data Service and Resources Limited, Afolabi Olowookere also speaking to Narametrics said the challenges of apathy in the market arising from the market crash of 2008/2009, low-income and cash crunch are some of the major factors forcing brokers to intensify marketing to get more clients to invest on the NGX.
Olowookere added that uncertainties around political cycles are making foreign investors more careful in taking positions in the local bourse leaving domestic investors to be the only solution to the market.
- “Generally purchasing power is very low in the country, in the last one-year people have been facing fuel scarcity, forex challenges, cash swap challenges, and the kind of retail investors we have in the country are just people whose purchasing power is low.
- “Foreign participation has become lower than what we have about two years ago. We need to create an appetite among domestic investors to buy and sell. It requires a lot of investment education to buy and sell shares to create liquidity in the market,” he said.
Confiscation of depositors’ funds by the CBN
Mr. David Adonri, Executive Vice Chairman, of Hicap Securities Limited said that brokers don’t want to starve to death and that’s why they are redoubling efforts in marketing to retail investors to return to the market.
Adonri said the cash crunch exemplified by the confiscation of depositors’ funds by the CBN since December has adversely affected the economy and possibly depressed the fundamentals of the listed companies which may result in poor first-quarter results.
- “Investors are now reacting to that possibility by reducing their demands for stocks, hike in the interest rate and political uncertainties following the non-credible election are also key factors that are dropping the demand for stocks. Hence the reasons brokers are intensifying their efforts to re-stimulate demand through intensive marketing.
- The market is standing on two legs, if one leg is not performing, the other will start performing, and that is what we call a trade-off between the equity and debt market. Any time equity is not performing, more financial assets will be migrated to the debt market. Operators are also intensifying efforts to get investors into the debt space for a short-term investment, and for the long term, because we have moved into the buyers ‘market when the equities are declining, it is time for the long-term investors to take a position,” he said.
He noted that foreign portfolio investors have declined considerably but that domestic institutional investors are very active, particularly the pension fund.
On the decline in the volume of trade, Adonri said 60% of the decline should be attributed to foreign investors while 40% should be linked to domestic investors.
Cryptocurrencies
On whether Cryptocurrencies are a threat to the stock market Olowookere said they are not really a threat to existing investors who are already aging but a big threat to potential young investors who are willing to invest.
- “With the emergence of Cryptos, they will weigh their interest while making an investment decision. I see the emergence of Cryptos as a long-term threat in the market. The young people that are supposed to develop the market in the future now have another option which is competing with the market. It is going to be a bigger threat in the future,” he said.
Brokers’ app
Speaking also on whether the emergence of brokers’ apps like Bamboo or Trove is taking market share from brokers, he said the apps are like a marketing and facilitating platform for brokers which is helping them to execute their work easier.
- “There is always a broker who executes on their behalf and partners with them, they are not taking market share from brokers but only redistributing the market shares to brokers that are technologically savvy. But it will affect brokers who don’t have the technical knowledge and are just waiting for investors to come knocking for investments.
What you should know
The local bourse opened the trading week negative as the benchmark index dropped by 1.96% to close at 51,952.99 points.
Monday’s loss marked the ASI’s sixth straight session loss. The sell-off in one of the telecom giants, Airtel Africa Plc which dropped by a maximum of -10.00% was the major drag on the overall market’s performance. As a result, the year-to-date (YTD) return dipped to 1.37%, while the market capitalization shed N569.12 billion to close at N28.30 trillion.
Further analysis of the day’s market activities showed trade turnover settled higher relative to the previous session, with the value of transactions up by 148.31%. A total of 1.72 billion shares valued at N4.79 billion were exchanged in 4,286 deals. Transcorp Plc with +2.19% led the volume and value charts with 1.55 billion units traded in deals worth N2.10 billion.