Brown Rally

Brown Rally

Should you buy stocks now?

1. Are the bulls really back on the Nigerian stock market? In the last few weeks the market has seen a strong rebound and investors are now wondering if they should start buying stocks again. Are we seeing a market rally that will be sustained or will the bearish trend that has characterized the market in the last eighteen months resurface soon?  

 

To answer these questions, investors need to ask several other questions which will determine if they should start buying shares again.

 

Did the market bottom out before the current rally?

This is a difficult call to make. Some stocks and sectors may have reached their lowest in prices, but did all stocks touch this level. The banking sector took the biggest hit in the market down turn, where average prices dropped as low as 60 percent. However, driven by a series of good financial results, dividend and bonus announcements, most of the stocks in the sector has seen a steep rebound in their share prices. Zenith Bank for example, has seen its share price go up by more than 60 percent in May following the announcement of an impressive midterm results and bonus issue of one share for every two held by investors. Almost all listed banks saw an appreciable improvement in their share prices in May.

 

 The banking sector rally was primarily responsible for the steep rise in the all share index since banks control more than 60 percent of the Nigerian Stock market capitalization. The rise in share prices in the banking sector has helped muster positive sentiment for other sectors of the capital market.

 

But the question is if this rally will be sustained beyond the second quarter earnings season. This is doubtful. The earnings season is expected to wear off with intensive profit taking by speculators who took position ahead of the earnings season and loss cutting from investors who have been hard hit by the steep drop in the market. This is expected to dampen the current upbeat in the market from June when the earnings season will be over. Race by banks to boost their balance sheet position towards the end of the year following the common year requirement for Nigerian banks will ensure tightened liquidity and most likely squeeze life out of a sustained market rebound. So if you are a speculator, and looking for some cheap bargains in stocks, perhaps hold on to your money and shop for some bargain stocks after June. However, those hit hard by the market down turn will have to sell now as the chances of selling at a good bargain after June is slim.

 

Crude oil prices may up the stakes

Some analysts have traced a positive correlation between the direction of crude oil prices in the international market and share prices on the Nigerian stock market. The higher the price of crude oil in the international market, the bullish the Nigerian stock market. With crude oil prices looking up for the rest of the year, with the Economist magazine forecasting it to stay above $50 compared to the budget benchmark of $45, there is the feeling that the market may turn bullish. The credibility of this argument arises from the fact that Nigeria’s economy is 90 percent dependent on crude for its foreign exchange earnings and subsequent government financing.  Based on this argument, long term investors may need not wait till the second half of the year to take a position in the market. They have to take their position now to maximize their returns. Those hard hit by the market however, can hold on to their shares and sell later in the year when prices will be significantly higher.

 

Are you a long term investor?

If you a long term investor, you can conveniently ignore all the above arguments and start buying stocks now. With most stocks still significantly selling at a discount to their boom prices, there may be no other better time to get into the market than now especially if your investment horizon is more than ten years. The market is bound to rebound sooner or later. There is another bullish run in the making and the best time to position for such a bullish run is now when everyone is afraid and cautious. A research done in the United States shows that between 1926 and 2008, the percentage of times that investors lost money in the capital market over a 20 year period was 0% while the percentage of time investors made an annual return of 10% over the same period is 69%.

 

1. The implication is that if you have a long time horizon in perspective, then you should start buying now and you will never go wrong.    

About the Author

Finance and communication specialist with experience in banking, research and financial analysis and media. Academic qualifications include an M Sc in Banking and Finance, a Bachelor’s Degree in Finance and professional affiliation to the Chartered Institute of Stockbrokers (CIS level I) and the National Investor Relations Institute (NIRI) United States. Good computer skills- Microsoft Excel, Access and Word-. Won four different merit awards in financial journalism

Is Obama developing an army of brown shirts?

Some reports say that the groups, ACORN,SEIU,and the Black Panthers are uniting into an intimidating force to attend rallies and help persuade
attendees not to speak their piece. Is this the citizen army Obama talked about during the campaign? (SEIU is the Service Employees Int'l Union)
There is a detailed report going around the internet that members of the SEIU were intimidating attendees at the Obama visit to Belgrade,Montana

They are like the Hitler Youth, opposing the opposition, doing the work and support of the Herr Fuhrer, all Heil...
Only difference being is that The Hitler Youth were good looking blond kids,...
Obama's brown shirts are scary looking thugs,...
Mostly Criminals, ...you voted them in America, I did not,..

Uncategorized asher brown rally, brown, brown rally at ucla, clinton brown rally, featherstone, jj brown rally, live, mp3s, rally, ucla brown rally