Stakeholders Point Ways Regulator Can Sustain Stock Market Rally

Market stakeholders have suggested ways to sustain the recent market rally that has seen the market record a year-to-date growth of about 32.7 per cent as at yesterday. The stock market’s performance so far in 2017 has compensated for 2016’s disappointing performance.

Although the growth is good for investors, there have been concerns on how to sustain it going forward. However, some stakeholders believe that regulators are in the best position to give the market needed direction.

According to them, enforcing rules that reassure investors of the safety of their investments and by implementing some initiatives that were introduced but abandoned, would help to sustain the rally.

An investor, Mr. Moses Igbrude of Independent Shareholders Association of Nigeria (ISAN), said apart from retail investors, many institutional investors and pension funds have remained wary of the market, and for good reason.

“The experience of a severe market decline in 2008/09 is still fresh in many portfolios. As the largest base of institutional funds to deploy, they are a significant resource for the sustenance of the market. However, they would have to have the confidence from regulators and operators that safety checks are in place and rules will be enforced to ensure that pensioners assets are not taking undue risk,” Igbrude said.

Also, a stockbroker noted that revisiting the introduction of short selling and security lending will help. According to the broker, the market has always considered introduction of shorting and securities lending.

“These two products are a key hedge that pension funds can turn to in building income streams for their portfolios and limiting downside risk for the equity portion of their exposure. Also, as part of efforts to address the effects of unsupervised margin activity in 2008, the Central Bank of Nigeria (CBN) and Securities and Exchange Commission (SEC) issued margin guidelines in 2010 with the SEC actually issuing a margin list on June 14, 2013. Sadly not much has been heard of these two notable initiatives,” he said.

The broker added that the issue of market makers that was introduced by the Nigerian Stock Exchange (NSE) some years back.

The NSE had introduced its market classifications and also its basket of securities for market makers. But there was no follow through and these two initiatives have complimenting ties to the steps taken by CBN/SEC to ring fence the universe for participation in the market.