As the stock market added 6.23 per cent in All-Share Index in May 2022, investors dumped 38 per cent or 53 out of 152 listed stocks on the Nigerian Exchange Limited (NGX) as they do not provide much opportunity for price appreciation and dividend payout.
The market indicator, NGX All-Share Index hits over 15-year high in May 2022, driven by low yield in fixed income securities, impressive corporate earnings by listed companies posit-covid-19, and steady increase in global oil prices that has improved liquidity in the system.
According to capital market stakeholders, these stocks in May lacked fundamentals to attract investors demand and supply, leaving their prices flat, stressing that most of them have remained unchanged over the years.
Findings by THISDAY from the NGX monthly statistics revealed that nine insurance stocks traded flat in May 2022.
Further findings revealed that investors shun listed stocks in the Growth Board and Alternative Securities Market (ASeM) on the backdrop of poor corporate earnings, corporate governance and failure to disclose critical market information required by investors to thrive demand.
Despite the bourse implementing rules on par value and share price methodology to enhance market liquidity and transparency, a total of 15 stocks traded flat at N0.20 per share In May.
The Exchange had announced that from January 28, 2018, the minimum price at which stocks will trade, will be N0.10 kobo per share.
Prior to this, the minimum price floor was fixed at N0. 50 kobo per share (which is also the par value).
The stocks that traded at N0.20 per share in May are; Smart Products Nigeria Plc, Capital Oil Plc, Universal Insurance Plc, Standard Alliance Insurance Plc, Tantalizers Plc, Resort Savings & Loans Plc, Secure Electronic Technology Plc and Omatek Ventures Plc.
Others are Goldlink Insurance Plc, Guinea Insurance Plc, Daar Communications Plc, Deap Capital Management & Trust Plc, DN Tyre & Rubber Plc, African Alliance Insurance Plc and Afromedia Plc.
They stakeholders that compromises of shareholders, stockbroker and analyst attributed flat stocks to liquidity and weak corporate earnings.
The Managing Director, ARM Securities Ltd, Mr. Rotimi Olubi in a chat with THISDAY attributed the trend to liquidity of the securities, stating that these stocks lack information to drive local and foreign investors’ demand.
According to him, “Most of these securities lack liquidity to attract investor patronage. Liquidity is also a function of investors confidence in the management of these businesses and confidence around continued return on investment.
“Besides, one of the things that triggered liquidity is corporate performance of these securities. “Another thing is timely market driven information.
When a certain company lacks information that shows the corporate direction of business, we are not likely to see investors stake their money into it. Timely information drives prices of securities once it is listed on any Exchanges.”
He noted also that the number of deals and average volume traded per day is one of the key components that drive liquidity.
He added further, “Some of these stocks on the bourse are good but there is no information to promote activities until the time comes when there is enough information that triggers generality of interest.”
The Chief Operating Officer, InvestData Ltd, Mr. Ambrose Omordion noted that most mid-low capitalised stocks traded flat in May 2022, while highly capitalised stocks are driving the market performance.
He said, “When it comes to stocks investment, investors look at leaders in some sectors and consider if the company’s dividend payout is encouraging or if its shareholding structure is small.
“Across the global market, all the stocks are not expected to appreciate at a time. While some are trading flat, others might appreciate. The key point is that something must trigger these stocks to appreciate or else, it will remain flat.”
He maintained that Nigeria’s economy and policy by regulating bodies played a major role in these companies’ stock price appreciation.