N188bn lost in bearish run
By Nkiruka Nnorom
OPERATORS in the capital market have called for caution in stocks investment as the equities market closed in fourth consecutive week of bearish trend, resulting in loss of N188 billion to investors.
The operators, who argued that the recent increase in Cash Reserve Ratio (CRR) by the Central of Bank Nigeria (CBN) is contributing to the downturn, advised investors to consider investing in fundamentally sound stocks.
The CBN had on January 24, 2020, raised the banks’ CRR to 27.5 percent from 22.5 percent, a development securities dealers said immediately triggered sell-off by investors.
“Amidst continued weak market sentiments, we advise investors to trade cautiously, taking positions in fundamentally justified stocks,” analysts at Cordros Capital, a Lagos-based investment banking firm said.
The equities market capitalisation had fallen to N14.268 trillion from N14.456 trillion in the previous week amidst the continued risk-off sentiment.
The All Share Index (ASI) also fell to 27,388.62 points from 27,755.87 points, indicating 1.32 percent negative returns.
Victor Chiazor, Head of Investment and Research, FSL Securities, argued that the decline in the equities market in the last three weeks could not be entirely attributed to the increase in banks’ Cash Reserve Ratio.
He said that investors are taking profit given the rise in stock prices at the tail-end of 2019 and beginning of the year, 2020.
“With regard to the equities market, it may be unfair to totally resolve that the drop in the equities market is directly as a result of the rise in CRR. As we all know, the equities market revolves in cycles and despite it being information driven market, I don’t think the drop in the market can totally be attributed to the rise in CRR.
“I believe the market having closed the year 2019 on a negative note with stock prices much lower, investors took positions in the early part of the New Year ahead of the companies’ full year earnings and dividend declaration and as expected, some investors are already booking their profit given the rise in stock prices over the period,” he said.
“Going forward, as we begin to see company earnings and dividend declared, we will begin to see a gradual return to the market and prices are expected to rise in reaction to most of the positive earnings that are expected to hit the market,” he added.