Stock Market Tips For Nigerians

You meant to say Bull market rally bounce . . . didn't you?

Kai i remember now we should have listened to YOU.

No, I meant what I wrote. This type of bounce is very common in bear markets. Some people call it a "suckers' rally". For a short time prices start to rise and everyone starts to think that the trouble is all over, but the real big money never commits and volume starts to decrease as price increases, causing a wedge formation. At some point the resistance point is met and when the test of resistance fails, the market drops like a rock and seeks out a new low. Sometimes a secondary rally even forms after the first drop but it is followed by an even steeper drop. The same thing happened in the US between April and May. When June arrived and people finally caught up with the reality that the financial crisis wasn't anywhere close to being resolved, that's when the bloodletting really started.

Now our problem is that the drop is starting to happen, except that now thanks to our genius regulators we have a situation where a fake rally was created on stocks that were already overbought to begin with, and now what you have is a bunch of even more dead weight that nobody wants to pay for but we have to wait for weeks, months, who knows how long while the thing slowly deflates. Woohoo for 1% price floors.

Sorry if I sound like a prophet of doom, not my intention. I can't encourage panic selling -- I'm only one small fish in the ocean, and everyone is free to make their own decisions. I just say what I see. You just can't wake up one day and think because you're the government you can rewrite the basic laws of economics. In the end it is the investors and the people that suffer. I said they should've allowed the market to drop and find its bottom and then recover. There are still underlying fundamentals -- strong GDP growth, outstanding profits and enough cash flow to preserve the long-term uptrend. We just have to face the reality that the season of irrational exuberance is over and things have to come down to earth for now. It's a shame that governments of developing nations have this habit of shooting themselves in the foot whenever they see adversity. The Pakistanis just did a similarly stupid thing (in fact their own retarded solution was to stop price decreases completely -- imagine), and the Indians decided to ban commodity futures trading to try and curb inflation. All these actions are like gouging out your own eye because something entered it. Not the smart thing to do.

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One favourite quote i will never forget in my life is one from master himself   " THE DUMBEST REASON FOR ANYONE TO BUY A STOCK IS BECAUSE IT IS GOING UP" WARREN BUFFET. That's why wise investors smile in bearish periods while ignorant investors run coz definately as the Bible says "weeping may endure for a night but surely joy cometh in the morning." "ABO ORO LA N SO FOMO LUABI TO BA DE NU RE A DI O DN DI" ASA
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Finally now we're getting a clearer picture of behavioural patterns.
I'm ready to buy some more Oceanic by this friday at lowest price, sacrifice loosing 1% by monday next week, logic of this is that by Tuesday next week, Oceanic should start reversing. Volumes are thinning out, there may be non available to buy by next monday, best bet will be this friday to get some more.

were u able to exit your oceanic you talked about last week?  u  had wanted to exit by last friday, and since tuesday  last week oceanic has been in reds.   l cross my fingers on oceanic for now, l pray it goes up as u said.

As you can see i'm planning more. I didn't sell because there was no point in selling then considering the impact of 1% on CICO moves.
We saw the impact of the good side (5%), its important to also sit back and understand the statistical impact of the new 1% on price movement, then you can plan.

Banks shun CBN’s order on margin accounts
Posted Tuesday, September 9, 2008

With the recent Federal Government intervention in the capital market meltdown, depreciation in the prices of stocks in the market may not stop soon as banks have continued to shun the Central Bank of Nigeria’s (CBN’s) advice for a waiver to be extended to expired margin accounts to allow the market recover fully.

 

Signs from the market indicate that operators’ morale is still very low, despite the intervention of the government about two weeks ago. It was revealed that the banks have continued to defy the CBN’s advice which was agreed at a meeting with chief executive of banks, convened to seek solution to the persistent slide of share capital.

 

Market sources said the downward trends in the market might still remain because the banks had continued to sell off shares bought through margin facilities, which could not be redeemed by investors who got the loans to mitigate the loss incurred in the long period of the trend in the market.

 

Specifically, sources said the credit management units of the banks had persistently put pressure on their assets management units to recover loans given through margin accounts, thereby making the market to witness more divestment rather than purchase briefs from investors.

 

The sources disclosed that while the CBN advised banks to restructure loans from margin accounts to allow customers to continue to service the facilities as fresh loans in the interest of the market, the banks had discountenanced the agreement, forcing investors to forfeit their investments.

 

Margin facilities entail the bank to provide 70 per cent while the borrower bears 30 per cent of the cost towards facilitating shares purchase by corporate institutions and individuals in the capital market.

 

In a bid to stem the meltdown (persistent fall in the shares) in the capital market, the Federal Government had intervened through a parley with the management of the Nigerian Stock Exchange (NSE) and other stakeholders at a meeting in Abuja.

 

At the meeting, all stakeholders had adopted a number of measures aimed at stopping the slide of share prices, which lasted over five months, with a loss of over N3 trillion.

 

Some of the measures include the power of the office of the Attorney General of the Federation to issue an exemption to the provisions of the relevant sections of CAMA, to permit quoted companies to buy back up to 20 per cent of their shares to curb the spate of bearish trading in the market.

 

The CBN was also directed to take appropriate measures to ensure adequate liquidity within the system to oil operations in the capital market, while a capital market stabilisation fund is to be established, as an intervention instrument to stem the meltdown in the market.

 

Also, the commercial banks were advised to restructure existing facilities to aid operations of licensed stockbrokers, institutional and individual investors on longer repayment terms.

 

Both the Securities and Exchange Commission (SEC) and the NSE, all capital market operators, also agreed jointly to reduce the burden on investors by cutting fees significantly.

 

Already, the NSE, with effect from yesterday, cut its fees by 50 per cent. One per cent maximum downward limit on daily price movement would be allowed, while the current five per cent limit on upward movement is retained.

 

The NSE has also embarked on the review of its trading rules and regulations, particularly regarding listing of new issues of companies wishing to list their shares from private placements. - Tribune

I think some of these stocks will begin to defy gravity upwards small small just like afribank has just done.Remember the buy back.

I didn't know it would take a special intervention by the attorney general for companies to mop-up their shares as market stablizing tool. The result? Naija market still get plenty potential.

The banks are still over-leveraged. They have no choice. This is what happened when you don't have competent regulators. When IBTC and co. were running up and down giving people 80% margin on equity investment accounts, our regulators were too stupid to realize that this was not going to be sustainable and that the bubble would eventually burst, just like every other bubble in history has. I still remember speaking to an IBTC branch manager in Abuja who was asking us to open an account with N5 million and receive N20 million in margin. As long as everything was going up all was groovy -- investors were making money and banks were making a killing off margin rates. Problem is when the crap hit the fan and losses started to mount, banks started to realize that they were overexposed and had to start making margin calls. They have to continue to liquidate margin accounts or at some point their capital base won't be able to support their bad debt exposure, and before you know it we'll be looking at our own mini Bear Stearns Naija style. Our regulators are too stupid to see this. I hope they don't do something even more unfortunate and start forcing banks to keep margin lines of credit open -- they've already done enough to cripple the market as it is. Such a move could be catastrophic for a financial system that was just starting to really find its stride.

There is nowhere in the world where you'll find an investment bank offering you 80% margin. Nowhere. You wonder why things have been so bad lately? There you go. It is the height of fiscal irresponsibility. And they think they can solve the problem by setting a 1% price floor and begging banks to extend margin credit lines. Stupid, stupid, stupid.

wudnt be surprised that some of them are into insiders trading

i have put up my Oceanic for sale for a week now, and no one is willing to buy. i just tire for this whole thing

@father of2,
the offer positions in oceanic are dropping down,from 137 to 54million in one day.I Belief felas has started withdrawing their mandates.

 That one is not the problem really. 134million offer can change to be bid overnight.Usually that is not too important a parameter.
What i'm looking for has not yielded completely, if it doesn't yield completely, any turnaround will be shortlived.
It doesn't look good now for at least first few days of next week.But i pray it maintains this 1% for another few days so everything can set properly for
a turnaround. In hindsight now seeing how 1% behaves on price movement, it shows CICO moves can still reign again.