Market Awaits AMCON Take-Off

The Nigerian Stock market has remained positive so far this week, having bounced from the six days consecutive downward performance.

Analysts say investors’ buying pressure continued to dominate trading activities on the floor of Nigerian Stock Exchange (NSE) after a lackluster performance that trailed the passage of the Asset Management Company of Nigeria (AMCON) Bill.

The AMCON is expected to buy up the toxic asset, open up the books of the banks and thus encourage lending. Under the harmonised bill, the toxic assets would be exchanged for seven-year bonds or other debt instruments issued by AMCON and guaranteed by the ministry of finance

The Tide source learnt that the AMCON value would be N10 billion. Analysts at Afrinvest West Africa had attributed last week’s bearish trend to include profit taking, just as other investors exited their short-term positions in anticipation of further decline in share prices.

On the other hand, Sterling Capital attributed last week’s bearish outlook to several factors including; “the usual month-end sell down, forced sale by stockbrokers to enable them repay their margin loan obligations to the banks and apprehension concerning developments in the global economy, particularly the Euro zone.”

Quoted equities lost N152.84 billion in capitalisation during the week, but the NSE-ASI which peaked this year at 28,097, after advancing by 34 per cent from where it was at the beginning of the year, has since lost some 10 per cent of those gains but is still up +21 per cent for the year as of January 28, 2010.

Currently, most stock prices have bottomed out while creating opportunities for new buyers. Market analysts posited that the new cycle would continue as more investors take advantage of the new positive trend. “We expect increased liquidity and low interest rates to induce demand as value investors begin to position for market recovery in view of current low prices of stocks. But opportunities continue to exist for stocks with good fundamentals for medium to long term, Sterling Capital,” stated.

At Cordros Capital, the analysts were of the view that the market would continue to be more volatile even as investors trade cautiously.  

“Concerns about the AMCON are expected to weigh positively on stocks in the weeks ahead. We expect that in the coming weeks, the market will move in a direction with upward bias, as the weeks ahead bring an array of companies’ second quarter reports being released to the market”.