Stock market in 2015: experts hinge growth on investor attraction
The financial year 2015 was indeed victim of spill over of 2014 poor performance. Despite all predictions by market analysts that 2014 performance would greatly outweigh that of 2013, unfortunately it ended flat. Our corespondent, Ngozi Onyeakusi in this special report weighs some of the key initiatives introduced to attract investors to the market as well as other events that shape the year.
Investors in the nation’s capital market had towards the end of third quarter of 2015 described the year as one of the under performed in the recent time. It was yet another year of bad reckoning for investors. All hopes were dashed to the wall as the market again suffered losses to the tune of N2.24 trillion compared to N1.75 trillion of 2014.
Recall that 2014 recorded the worst performance ever since the nations capital market started showing signs of rebound in 2012 after its crash in 2008. Consequently, the CNNMoney ranked it 72 out of 74 exchanges considered the NSE All-Share Index at negatively 20.67 per cent while the Telegraph UK placed it third among the worst performing stock markets in the world in 2014.
Unarguably, the market prospect for 2015 was defeated following some external factors raging from uncertainties surrounding the general election held within the period to insurgency in the north east part of the country.
Others include impact of crude oil price drop, the devaluation of the Naira, impact of some of the government monetary policies on the economy among others.
Market performance in 2015
The twin market indicators, the All Share Index and market capitalization within the period recorded depreciations. ASI declined by 7,785.91 points or 22.47 per cent to closed as at December 23, 2015 at 26,871.24 points, against the opening index of 34,657.15 points, while the market capitalization of listed equities dipped by N2.24 trillion to close at N9.238 trillion.
The NSE Banking Index dropped by 24.19 per cent .The NSE Consumer Goods Index carrying year-to-date loss return of 23.46 per cent, while NSE 30, index, which tracks the highly influential 30 most capitalised companies at the stock market declined by 22.66 per cent.
The NSE Premium Index, recording three newly grouped companies, namely, Dangote Cement, First Bank of Nigeria (FBN) Holdings and Zenith Bank, went down by 21.75 per cent, NSE oil & gas Index has a negative return of 13.94 per cent, underlining losses in the upstream and downstream segments of the oil industry while industrial goods sub-sector has shown the greater resistance with a modest negative return of 4.26 per cent.
Key Events in the market
The Securities and Exchange Commission, SEC and Nigerian Stock Exchange, NSE have been within the period championing major reforms aimed at attracting investors, bringing sanity and restoring investors confidence through regulations and enforcement , strengthening market institutions, promoting corporate governance.
Launch of National Investor Protection Fund NIPF
Mr Mounir Gwarzo, the SEC Director-General, disclosed that the fund would be for loses arising from the insolvency, bankruptcy or negligence by non-broker/dealer capital market operators.
NIPF is a trust scheme established to compensate investors whose losses are not covered under the Investors Protection Funds being administered by Securities Exchanges and Capital Trade Points.
“This is a very excellent feat taken by the commission with its little resources as it has not been funded by the government,” he said.
Sanction and revoke of license of errant firms.
The commission, a bid to instill discipline in the market had during the year sanctioned several operators that had breached market rules and regulations. Also, 84 firms’ operational licences were revoked by the commission for failing to meet registration requirements, amongst others.
Launch of premium board
Similarly, in line with commitment of promoting companies, the NSE within the year launched a new listing platform – Premium Board and its associated Premium Board Index – featuring companies that meet the Exchange’s most stringent listing criteria of capitalization, governance and liquidity. Three companies – Dangote Cement Plc, FBN Holdings Plc, and Zenith International Bank Plc, met the criteria and therefore qualified for the pilot phase.
Reduction in transaction cost
According to the SEC, DG, the commission was working towards ensuring that cost of doing business in the market is reduced.
“Some of the initiative we are looking at for 2016 within the master plan is the issue of transaction cost. We did an excellent research, we find out that Nigeria is very expensive in terms of transaction in the market. A committe has been set up under the leadership of Ade Bajomo, the executive director of the NSE, to look at how we can make transaction in the market a little bit cheaper. And it means that every key player in the market, SEC, NSE, S, Brokers, Issuing Houses, Registrars will have a look at ways and means they can review their fees”, said Gwarzo.
Getting more companies listed; Access to capital for SMEs
SEC and NSE in the recent past has been in the business of designing programmes that will make the market viable so as to attract huge investors both local and foreign to the market.
According to the DG, SEC, “We also want to focus on the access of capital by SMEs. We think that they are the major engine of growth. In all countries, SMEs are the major employment generation enterprises. So, we are looking at how we can encourage SMEs to be listed in the market. We are able to relax some of the requirement to give rooms for some of this companies. Stock Exchange has done quite well in terms of restructuring their securities market and relaxing their requirements. One of the things we are looking at doing is to be having a regional interface with some of these companies. Let them tell us their concerns, is it the fees or what? And we believe that this sort of engagement will start next year”,
According to Former Director General SEC, Aruma Ote, “To attract more companies to list, and to attract and retain a larger pool of investors, at the minimum, we must ensure that we maintain stable and consistent policy regimes, uphold fair and orderly markets based on just and equitable principles that will generate and preserve issuer and investor confidence in our markets.
“We realise that to attract more companies to list, we must partner with policy makers to take full advantage of developmental initiatives which require massive capital; for instance, sector-wide policies calling for recapitalization of and consolidation by operators, and other privatization/