Don’t Be Worried About The NSE Just Yet

The entire world is pseudo-handicapped as it has forced us to be spectators of the impact of one ill event on different aspects of our lives.

The entire world is pseudo-handicapped as it has forced us to be spectators of the impact of one ill event on different aspects of our lives. With many businesses temporarily, yet indefinitely shut down and investors going into the defensive to preserve their income, it is impossible to talk about the tips and tricks on winning in the stock market without acknowledging the elephant in the room.

So far, global stock markets have had their share of the burden. Reports by Bloomberg have it that shareholders across the world lost an estimated US$6 trillion in market capitalization between just February 24 and 28 of this year – going one as one of the worst bear market trends in recent time.

However, the NSE has still been experiencing mixed movements. Recall that even before the pandemic, there had been challenges such as the directive of the Central Bank of Nigeria (CBN) on restricting both institutional and retail investors from investing as part of its Open Market Operations (OMO), in the fixed income market. We experienced sustained decreases in the rates in treasury bills and even bond rates. Just the treasury bills market experienced rates as low as 2.49%, 3.78%, and 5.3% respectively in its 91-day, 182-day and 364-day rates. What this had done is restrict investors’ investment in safer short-dated money market instruments.

Thanks to the uncertainty of the times, the NSE has experienced its own share of the bear economy. At the close of trading last week, the NSE All-Share Index and market capitalization reduced by 1.41%. While the NSE All-Share Index closed the week at 22,599.38, the market capitalization closed at N11.778 trillion. So far, these dips are not as scary as many other economies that have no doubt felt the heat of the crisis 2020 came with.

However, what is even more exciting is that analysts believe this might just be good for investors in the Nigerian Stock Exchange (NSE.) – Specifically the new investors. The idea is that the coronavirus-led bear market has opened up new opportunities especially for value investors.

Ambrose Omordion, the CEO of Investdata Consulting has made it clear that regardless of the high risk associated with stock market investment in these times, investors now have the opportunity to create wealth by “intelligently investing in equities” while also buying value stocks at discounts.

"In our drive to make money, many of us try to exchange time with money, forgetting that we only have a limited amount of time to generate wealth by investing our hard-earned income to attain a short-term goals.

The idea is that as stock valuations become even cheaper, investors who have the fast thinking as well as the funds to accumulate stocks with strong fundamentals will be able to gain further down the line in anticipation of a good market recovery. Regardless of the divergence market performance reports, a new wave of investors will come out of this and they will be the victors of the pandemic. They would be the ones who turned lemon to lemonade.

Written by Lawretta Egba.