Hope rises as bulls sustain grip on stock market
Nigerian equities market may have emerged from the lingering Bears’ market, which last year, eroded the prices of many shares.
Since February this year, bulls started to emerge intermittently and this led to the market recording about N0.258 trillion appreciations in capitalization at the end of the month.
This trend has continued uninterrupted and the market has been posting positive results.
It would be recalled that late last year, experts predicted that the market would experience a rebound from the second quarter of 2016, and judging from the emerging scenario, their prediction may turn out to be right.
However, market analysts attributed the current bullish run to investors’ drive to take profit ahead of probable positive earnings released by listed firms.
But other than this, experts, while explaining the factors that normally shape trends in the market identified the current law markers’ bent to make law on compelling Nigerians to buy made-in Nigeria goods as being the reason behind the positive rally now trending in the market.
According to them, there are four major factors that cause both long-term trends and short-term fluctuations. These factors are government actions, international transactions, speculation and expectation, and supply and demand.
Duke Usunobu, a Benin City-based market analysts, explained that government, through the Central Bank of Nigeria’s fiscal and monetary policy, has a profound effect on the financial markets. By increasing and decreasing interest rates, the government can effectively slow or attempt to speed up growth in the market, as higher interest rate makes investors to embrace money market and lower interest encourages investment in productive ventures/equities.
On International Transactions, he said: “The more money that is leaving a country, the weaker the country’s economy and currency. Countries that predominantly export, whether physical goods or services, continually bring money into their countries. This money can then be reinvested and can stimulate the financial markets within those countries.
“In Nigeria, are sons and daughters abroad have been doing this country a lot of good by constantly remitting money into the country. But the problem we have is that instead of investing such money in productive ventures, we spend the money on importing consumer products from overseas. The same goes for the billions of Dollars we have be getting from international sales of crude oil. We squandered it on importation. This is the reason the value of the Naira is falling against the Dollar.”
Explaining how speculation and expectation can dictate trend in the market, he said: “Where the investors and politicians believe the economy will go in the future impacts how we act today. Expectation of future action is dependent on current acts and shapes both current and future trends. Analysis of government and policy makers’ actions and pronouncements as well as other forms of fundamental and technical analysis can induce trend direction.
A good example is the news about what the law markers are saying on how Nigerians should be made to buy locally produced goods. This can cause investors to buy and sell in response to the information. Increased action around this information can create short-term trends, while longer term trends develop as investors fully grasp and absorb what the impact of the information means for the market.
“Trends are perpetuated by market participants and as more investors climb aboard to profit from a trend whether negative or positive, the market will continue to swing accordingly.
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