The Nigeria Stock Exchange recorded negative performance of minus 5.3 percent from January to October this year. Most of this negative growth, according to Saheed Bashir, Head, Investment Research, Meristem Securities Limited, is driven by flow of bad news in the economy. He, however, opined that the market can still overcome the negative performance before the end of the year, adding that investors need the guidance of analysts’ research notes to protect and grow their investment. Excerpts:

By Babajide Komolafe

GIVEN the three percent negative performance of the stock market this year, what is your projection for the market for the rest of the year?

Yes market has done three percent below the water. But it is wonderful performance because we have the economy in recession. Even when the economy was not in recession the flow of negative news undermines market performance because the market thrives on news. For example in Meristem, we pride ourselves as a company that provide up to date market information to grow wealth in good time in an atmosphere of transparency.

Saheed
Bashir

So information is key, timeliness of the information is key and the quality of the information. If you have the flora of bad news in the market, you should understand that bad news begets bad performance in the market because what drives performance is information. And three percent year-to-date negative performance is not a bad performance.

I mean in terms of market aggregate, though if you decomposed the three percent, you will see that it is disproportionate.   A number of equities have gained tremendously while the popular names in the market have also lost big time. So it is mixed, but if we extrapolate in terms of what we expect for the rest of the year.

For what we have for the rest of the year, November to December, I believe it is still enough for the market to pull around. Even our outlook for the market for the year maybe relatively market breaking even. But generally if you ask me, it is not too late for market to turn around the negative three percent performances and close flat or relatively flat for the rest of the year.

What is the rational for this optimism?

Essentially what drives the market is the NSE 30, and if the NSE 30 or if the stocks on the Premium Board of the NSE do so well or relatively well, if there is some level of appreciation in the market, or good news as earlier said. Because now we are having some pockets of good news in the market for example the $15 billion India deal, you also have a pocket of news from General Electric (G.E) talking about railway contract. These are good news that should flow to the market. But we have  also had a pocket of bad news coming into the market, talking about Moody and a couple of foreign firms talking about Nigerian banking sector and of course we have had a counter from the CBN saying that   no bank is going to collapse.

So CBN is going to provide some succour to the banks that is to dispel  the news coming from pockets of analysts abroad that the banks are having issues. Nobody is going to deny the fact that the banks are having issues. In fact apart from the top tier banks, the second tier banks are struggling in terms of their capital adequacy and their non performing loans. And expectedly so, it is normal, if it is not, we should began to query why it is not so. They have exposure to oil and gas, and look at the price of oil in the international market. The oil and gas companies are not doing so well, so we should expect.

How are capital market firms like Meristem coping with the challenges of the downturn?

Banks, consumers, companies even government, nobody is finding it easy these days. Everybody is just looking at what creative ways, what strategies can we evolve to turn things around. If we are not meeting our budget, what can we do to remain above the waters so that when there is a rebound in the economy of course we can float.  So that we can hibernate, and look at what can we do to protect our clients and also make some little income essentially that is what we are doing.

Research notes issued by securities firm have become the trend but are the reports effective in influencing investor’s decision?

Of course they do. Just like I said earlier, the Meristem brand is that we’re a friendly company with up-to- date market information. What do we use up- to- date market information for? It is to grow wealth in good time in an atmosphere of transparency. This is what clients need.

You need information, and what differentiates my information from that of my competitors is how timely and quality the information is and how transparent in our activities in dealing with our clients. These are what differentiate us from the rest of the packs.

So they use information for decision making. Like yesterday myself and  few  of my team members were with a PFA, which is one of our clients to discuss their portfolio with them, because they need information and we have the information, we crunch the numbers, we meet companies every now and then, that are quoted on the Nigeria Stock exchange, to discuss their numbers.

When we get their financials, their quarterly numbers, we look at it and we make projections, then we confirm our projections with them. Then we get other information, every information that trickles into the market. I just mentioned a few of them, the China deal, the India deal, the GE deal.

All those things put together, and how each of the firms responds  to those information, how it impacts on their strategies, we process it and make our forecast and we also follow up with the companies.

And we give advise based on the forecast, this particular stock, this is our view regards its performance. Some of the companies have started releasing their Q3 numbers and we are making projections, saying, this is what we expect before the end of the year.

So before the year-end results and audited accounts are released, it is good for you to take your flights to safety, so that you don’t get your fingers burnt. Look at Skye Bank, it dropped from about N2 to  below N1. It has destroyed value. Some could not exit and it is like that in other stocks, and some have gained.

Economic situation

We have seen rally in Okomu Oil, we have seen rally in Presco, we have seen rally in a few other stocks on the exchange and that is how market works. Look at Forte Oil; before now it was trading far above N200 per share, and information they have released from their financials is working against them, and look at the economic situation, look at what is it is trading.

So as you are getting that information, you are processing it, you are giving advice to clients, this is what you should do with your portfolio, it is not a time to run away from the market, especially for people whose business is about dealing with securities.

We are facilitators, we have brokerage firms, and we also have an asset management firm that also act on behalf of the client. So we also provide advisory services. So for some people, when they wake up that is their business. Just like us as well, we have subsidiaries and that is what they do, they must advise clients on what to do. So essentially people still play the market, they use information to take decisions, to protect value no most of all to protect and grow their investment.