Prices rise as trading volumes drops
A lot of events had occurred during the months of unexplainable price drop such as the alleged ban on margin funds by CBN amongst others. It is not news that a lot of investors lost huge sums of money during this period as most share prices lost as much as 40 percent to 50 percent in naira value. This of course would also reflect in the value of investors portfolio. Probably some investors had even secured margin funds just before the negative trend started and have incurred huge losses as well.
Events however began to take a u-turn as the CBN denied issuing any directive on the ban of margin trading. This was followed by the proposed introduction of share buy-back by companies and then a one week market intervention by the governing council of the NSE. Only last week, SEC also stopped the proposed recapitalisation of stockbroking firms which was meant to have been concluded by December 31, 2008. And then what happened?
The market indices began to rise and have been steady ever since then. One might say the rally can be traced to some decisions that were overturned, another might assume that prices had fallen so low and the only rational thing that could happen was for them to start going up. What is clear however is that investors have been mopping up units of stock in the last three months and such stocks are now scarce on the trading floor of the exchange.
Most stocks have been trading on low volumes since this new rally began and as such have been gaining maximum prices daily. This clearly indicates that most of the stocks are closing on bid and possibly this trend might continue for the time being.
While some investors say the best time to sell is when prices are falling, others say the best time to buy is when prices are falling. The truth and fact however remains that as long as people are selling, people are also buying. Only time will tell who made the right choice.
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