Prevailing economic downturn has continued to trigger persistent fall in share prices of listed firms, as share prices of most bluechip companies quoted on the Nigerian Stock Exchange (NSE), hit 10-year low under the current financial year.
Among these stocks are Flourmill of Nigeria, UACN, Guinness, Julius Berger, Honeywell Flour, UACN Property Development Company, GlaxoSmithKline, PZ Cussons and a host of many others, which are currently trading at levels last seen at almost a decade. Investors that have held the stocks in the last 10 years, have lost a large chunk of their holdings, as analysts blamed the development on massive selloffs witnessed in the nation’s bourse in the recent time due to prolonged confidence crisis and low liquidity.
So far, the earnings released by listed firms across all the quarters, including the half-year, have been weak, with most of them missing expectations and forecasts prompting negative price reactions in the midst of the prevailing low liquidity and even confidence crisis.
These are factors that have prolonged the negative market sentiments, in addition to the weak productivity and consumption, as earnings reporting season officially closed in July.Analysts noted that the ugly situation has been exacerbated by persistent economic uncertainties and slowdown that have bedevilled the country in the past few years, and therefore, urged government to revive the ailing economy with particular focus on insecurity and restoring confidence in the economy to attract more investments.
To underscore the deprivation of the stocks, at the close of transactions on December 31, 2009, UAC of Nigeria Plc shares stood at N36.75 kobo; regrettably, the same stock is now down to N4.80 kobo at the close of trading yesterday.Also, Guinness, which stood at N127.50 kobo during the same period closed at N41.40 kobo on Monday, just as Julius Berger fell from N55.60 kobo to N20.60 kobo.
Furthermore, Flour Mills, which share price stood at N36.00 crashed to N13.80. UACN Property, PZ Cussons and Honeywell Flourmills fell from N19.86, N25.00, and N8.50 to N1.11, N6.00, and N0.99, respectively.Speaking, the Chief Executive Officer, Investdata Consulting Limited, Ambrose Omodion, attributed the deteriorating state of the market to government’s failure to do the needful at the right time.
“Government has occupied itself with things that have very little socio-economic impact on Nigerians. As we have noted in the past, corporate earnings will, and have indeed started revealing the weak state of the Nigerian economy.”He therefore advised discerning investors to target value stocks considering the current low valuation to position for dividend income and capital gain.
Also contributing, the Managing Director of Crane Securities Limited, Mike Ezeh, noted that foreign and local investors have indulged in massive dumping in the past few years, which has ultimately depressed the share prices.“The politicians have been telling us that we are out of recession that Nigeria has bounced back, but we are still in recession. Both foreign and local investors are dumping their shares, and once this starts, prices will be depressed and the market will continue falling.
“It has never gotten this bad and it is very unfortunate. It is because the politicians have forgotten the economy of governance, and just facing the politics of governance. They do not care about investment, employment, productivity and the rest; the economy is in a comatose state, and that is a reflection of what we are witnessing in the stock market. He insisted that government must involve experts in governance to revitalise the economy, saying; “In terms of intellectual and input, Nigeria has developed so much that we can compete with other countries of the world, but politics is crude and backward. Our economists are excellent, they develop themselves.
“We must get economic experts into governance, let portfolios be assigned and let us know who the managers of the economy are,” he added. Similarly, President of Constance Shareholders Association, Shehu Makail, said the current state of stock market is a reflection of the weak macroeconomic situation being witnessed in Nigeria.He said: “It is quite unfortunate that stock market investors have lost so much since after the 2008 global financial crisis. While other emerging markets like ours have wriggled out of the crisis, Nigerian stock market is still struggling to find its feet despite the measures put in place so far by the regulators to strengthen the market.
“Let us know the direction of the economy. Government needs to tackle the issues of insecurity headlong; it is an impediment to investment. If you do not address insecurity, you cannot grow the economy because investors will not want to invest where their investment is not secured, and we need FDI to grow our economy.”