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Poll: Stock market rebound
Do you believe the Nigerian stock market which has recently been on the downward trend rebound?
Stock market to ride on back of low deposit, liquidity in 2008
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Ndi Okereke-Onyiuke, DG, Nigerian Stock Market
Low saving rates paid by banks, stable exchange rate, reforms in the bond market, inflow of hedge funds and application of the Securities and Exchange Commission (SEC) new rule on verification of new issues are among the factors that would drive market growth in 2008.
Other factors that would drive the market in the period are the coming on stream of the Nigerian Stock Exchange’s proposed e- bonus and e-dividend payment and the Debt Management Office (DMO’s) planned reactivation of corporate bonds.
The DMO last year successfully restructured 180 –day debt instruments into 10-year tenor and plans to achieve even a longer tenor.
Abraham Nwankwo, director general, DMO, said the office plans to restructure the instruments to 15-year duration this year.
The result of the longer term tenor is that DMO has been able to create a yield curve. According to Nwankwo, this would enable the private sector to float their own bonds, using the yield curve as benchmark.
He also noted that the DMO would introduce other instruments such as inflation index, floating rate and repos to boost the market.
The DMO, in collaboration with other stakeholders, he said, would identify the problems that inhibit the corporate bond market. To actualise this, a steering technical committee has been set up to advise it on the matter and the report of the committee which is dominated by private sector players is expected to help in the revival of corporate bonds .
Sonnie Ayere, managing director of UBA Global Markets, had predicted that the first and second quarters of the year would record some bullish runs with slow down in the third and fatique in the last quarter.
Ayere who also predicted average market return of 70 percent during the year said inflation rate is likely to be on the rise due to the increase in crude oil price to about $100 per barrel.
The current average lending rates of 17 percent is perceived as high compared with capital market’s seven percent cost of accessing capital and analysts believe the capital market would remain the preferred window of raising money by corporate bodies.This is expected to beef up activities in new issues market in the current year.
There are, however, mixed feelings on the direction of interest rate this year.
Abayomi Sanya, chief executive of Goldman Assets, said the combination of foreign capital inflow, deployment of pool of funds by banks, the release of N70 billion insurance capital from escrow accounts as well as return of money for unsubscribed new issues would boost liquidity and moderate interest rate.
But Ayere thinks interest rate would be on the rise as the central bank may have to enunciate policies to balance inflation and interest rate.
The low deposit rate of about six percent paid by banks is expected to compel investors’ flight from the money to capital market. With the sticky rates in the money market, investors are expected to find the capital market a safer heaven in 2008, Sunny Oroge, managing director of Crossword Securities, said.
According to him, with three digits growth in returns from the capital market, most investors would opt for the long end of the financial market.
The stability of the local currency, analysts said, would create confidence in local and foreign investors as they can easily embark on medium and long term plans. Sanya also believes that the local currency would further appreciate this year to about N110. This, he said, would lead to foreign investors reaping high returns on investment.
The Nigerian Stock Exchange’s plan to introduce capital market derivatives like mortgage-backed securities, foreign exchange traded fund and real estate investment trust, stock brokers said, would help deepen the market, if it is implemented as quarterly results turned in by quoted companies suggest that their next financial year would be impressive with high prospects of returns through capital gain. Returns through bonus and dividend payments, especially from banks may, however, dip as these financial institutions have increased their shareholders base and will have to work hard to sustain earning and dividend per shareholders.
The new SEC rule abolishing blanket verification of new issues is expected to speed up market activities if enforced this year, stakeholders said. Sunny Nwosu. leader of Independent Shareholders Association, said the enforcement of the rule would serve as speed up investment in the market. Nwosu also believes that the NSE’s plan to introduce e-bonus and e-dividend would remove some of the encumbrances to dividend and bonus payment.
The DMO last year successfully restructured 180 –day debt instruments into 10-year tenor and plans to achieve even a longer tenor.
Abraham Nwankwo, director general, DMO, said the office plans to restructure the instruments to 15-year duration this year.
The result of the longer term tenor is that DMO has been able to create a yield curve. According to Nwankwo, this would enable the private sector to float their own bonds, using the yield curve as benchmark.
He also noted that the DMO would introduce other instruments such as inflation index, floating rate and repos to boost the market.
The DMO, in collaboration with other stakeholders, he said, would identify the problems that inhibit the corporate bond market. To actualise this, a steering technical committee has been set up to advise it on the matter and the report of the committee which is dominated by private sector players is expected to help in the revival of corporate bonds .
Sonnie Ayere, managing director of UBA Global Markets, had predicted that the first and second quarters of the year would record some bullish runs with slow down in the third and fatique in the last quarter.
Ayere who also predicted average market return of 70 percent during the year said inflation rate is likely to be on the rise due to the increase in crude oil price to about $100 per barrel.
The current average lending rates of 17 percent is perceived as high compared with capital market’s seven percent cost of accessing capital and analysts believe the capital market would remain the preferred window of raising money by corporate bodies.This is expected to beef up activities in new issues market in the current year.
There are, however, mixed feelings on the direction of interest rate this year.
Abayomi Sanya, chief executive of Goldman Assets, said the combination of foreign capital inflow, deployment of pool of funds by banks, the release of N70 billion insurance capital from escrow accounts as well as return of money for unsubscribed new issues would boost liquidity and moderate interest rate.
But Ayere thinks interest rate would be on the rise as the central bank may have to enunciate policies to balance inflation and interest rate.
The low deposit rate of about six percent paid by banks is expected to compel investors’ flight from the money to capital market. With the sticky rates in the money market, investors are expected to find the capital market a safer heaven in 2008, Sunny Oroge, managing director of Crossword Securities, said.
According to him, with three digits growth in returns from the capital market, most investors would opt for the long end of the financial market.
The stability of the local currency, analysts said, would create confidence in local and foreign investors as they can easily embark on medium and long term plans. Sanya also believes that the local currency would further appreciate this year to about N110. This, he said, would lead to foreign investors reaping high returns on investment.
The Nigerian Stock Exchange’s plan to introduce capital market derivatives like mortgage-backed securities, foreign exchange traded fund and real estate investment trust, stock brokers said, would help deepen the market, if it is implemented as quarterly results turned in by quoted companies suggest that their next financial year would be impressive with high prospects of returns through capital gain. Returns through bonus and dividend payments, especially from banks may, however, dip as these financial institutions have increased their shareholders base and will have to work hard to sustain earning and dividend per shareholders.
The new SEC rule abolishing blanket verification of new issues is expected to speed up market activities if enforced this year, stakeholders said. Sunny Nwosu. leader of Independent Shareholders Association, said the enforcement of the rule would serve as speed up investment in the market. Nwosu also believes that the NSE’s plan to introduce e-bonus and e-dividend would remove some of the encumbrances to dividend and bonus payment.
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