The Chief Executive, Stanbic IBTC Stockbrokers Limited, Mrs. Titi Ogungbesan, in this interview with Financial Vanguard spoke on how investors can take advantage of falling equity prices and other issues in the capital market.
By Peter Egwuatu
IT is generally believed that there is no better time to invest in the Nigerian capital market than now when prices of equities are falling. On the other hand, analysts have predicted a possible elongation of the present economic impairment. What will be your advice to an investor caught in this dilemma?
The downward trend in the equities market presents buying opportunities, in my view, as many of the listed stocks are believed to be under-priced compared with their intrinsic value. We at Stanbic IBTC believe it is the right time for investors to take position in the market, especially in quality names with attractive valuation supported by compelling outlook. Rather than refer to Nigeria’s current economic situation as ‘impairment’, we prefer to call it a ‘slowdown’ as the country passes through this transition phase to what we potentially call a reinvigorated growth phase. We believe on-going economic reforms if properly managed will be the much needed catalyst to unlocking the country’s vast potential.
We favour development of domestic manufacturing capacity as a sustainable fulcrum for Nigeria’s growth. There is an urgent need to develop other key manufacturing sectors of the economy to an export potential so as to be less dependent on oil for FX and deliver inclusive growth. While we acknowledge that the weak macro could keep valuations depressed for a prolonged period, it is difficult to time when the market will turnaround hence in the near term, we will advise investors to take positions in quality names as the opportunity arises.
Closely tied to investor confidence is market diversification, as far as wealth creation and investment options are concerned. The Nigerian capital market is predominantly equity-driven. We may argue that the Nigerian market is still in its infancy; but given the current economic dire straits, what else can be done in the area of diversification?
More products are being developed by market operators and participants to further deepen the Nigerian capital market. Over the past few years, a few products such as ETFs have been introduced and constant engagements are going on to build a suite of exchange tradable products. We believe having a range of products will also attract new investible funds. Additionally, the sector split of the NSE is skewed to financials and manufacturing sector and not a true reflection of the Nigerian economy. The listing of more companies in sectors such as ICT, agriculture, power and oil and gas should increase diversification.
The Debt Management Office a few years ago appointed Stanbic IBTC Stockbrokers Limited as the stockbroker to FGN Bonds and a key part of that mandate was to create awareness on retail bond trading in collaboration with stakeholders. What has been the response of the market since this appointment?
Market response has been positive and retail investors’ participation has improved over time. We expect further future improvement in the level of participation. Stanbic IBTC Stockbrokers Limited in its role as Stockbroker to FGN bonds has organised seminars/workshop in partnership with the DMO and the NSE aimed at creating more awareness amongst investors on the opportunities in the fixed income market. There has been renewed passion for retail bond trading and we expect this to translate into more transactions on the floor of the NSE.
The appointment of Stanbic IBTC Stockbrokers Limited by the Nigerian Stock Exchange as one of a ten-member list of market makers was in clear recognition of the company’s ability to deliver on its mandates, which also reinforced Stanbic IBTC’s overall leadership in the various market segments. To what extent has this assignment helped in stabilizing the capital market?
Our role as a market maker is to correct price imbalances whenever the need arises as well as provide liquidity in stocks which will ultimately help the capital market. We also think that the introduction of Securities Lending product will aid Market Makers in performing their role effectively.