By NKIRUKA NNOROM
Various measures being put in place to stimulate activities in the capital market seem to have started yielding results as liquidity flow to the market increased by 46.4 per cent to an average of N3.42 billion per day in the month of September.
The Managing Director, Financial Derivatives Company Limited, FDC, Mr. Bismark Rewane, made the assertion, while reviewing activities in the economy and capital market for the month of October.
He, however, stated that despite the increase in liquidity, Nigerian market still remained highly illiquid relative to other emerging markets.
The FDC boss cautioned that “inflow of hot money could lead to a domestic capital market bubble.”
Meanwhile, Rewane observed that there was increase in activity in small-cap stocks in the portfolio of market makers recently constituted by the Nigerian Stock Exchange, NSE.
He said, “Market making activity has not resulted in diversion of funds from traditionally heavy traded stocks. There has been no significant change in activity of large and mid-cap stocks. However, the impact of market-making activity will be better judged in upcoming months.”
He adjudged September the best performing months in the capital market since the market crashed the last three years, saying that there was 9.5 per cent return in the month compared to 5.23 per cent loss in the same period of 2011.
He noted that the All Share Index, ASI, returned 20.4 per cent or 4,412.06 points in quarter three, adding that it was the first consecutive quarterly gain since fourth quarter 2007 and first quarter 2008.
he explained that this was a marked up performance relative to the gain of 6.77 per cent and 2.99 per cent in July and August respectively, adding that the market crossed the 24,000, 25,000 and 26,000 points barriers in the month.
He further stated that a total of 10.0 billion units shares was traded as volume increased by 83 per cent during the month, saying that the huge volume traded was consistent with other high volume turnover in the final months of quarter one and quarter two.
According to him, the recovery witnessed in the market in the month of September was supported by both fundamental and technical analysis, even as investors’ interest was driven by performance potential, business model and strategy.
“The recovery was supported by improved corporate earnings despite tough operating environment. Fund managers were buying stocks to increase equity exposure in portfolio as yields in fixed income fall.
Big investors net buyers of stocks in August/September because to them, all the bad news had been discounted while corporate earnings were improving. There was falling yields in the bonds market making equity investment even more attractive,” he stated.