Tag: Nigerian Stock Exchange
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Photos: The Nation visits NSE
Oscar Onyema presented a replica of the Closing Gong to the MD, The Nation Newspaper to mark 10years anniversary -
Exodus of companies from Exchange
There has been a high turnover of companies from the Nigerian Stock Exchange in recent times, fuelling concerns in some quarters that the capital market is gradually losing its attraction as an investment window for discerning Nigerians, reports Bukola Aroloye
Nigerian investors had over the years raised concerns about government’s nonchalant attitude to their huge losses following regulatory-induced policies and inconsistent fiscal economic blueprints. To put their mind at rest, the Federal Government had assured retail investors of their safety, stressing that the government empathises with Nigerian shareholders over the situation of their portfolio investments.
The irony, however, is that while investors were hoping for greater protection following the assurances given to them by the regulators in the capital market, things took a different turn recently when the Nigerian Stock Exchange announced the delisting of some companies from its daily official list.
The NSE said it took the action because of the persistent failures of the companies to meet best corporate governance practices, as enshrined in the listing rules.
Some of the companies delisted include: IPWA Plc, G. Cappa Plc, West African Glass Industries Plc (WAGI), Investment & Allied Insurance Plc, Alumaco Plc, Jos International Breweries Plc, Adswitch Plc and Rokanna Plc.
Others include: Evans Medical Plc, P.S Mandrides & Company Plc, Nigerian Ropes Plc and Premier Breweries Plc.
Justification for delisting
The NSE management noted that the delisting was in pursuant to Clause 15 of the General Undertaking, Appendix III of the Rule Book of the Exchange, 2015, Part II, Issuers’ Rules, which referenced the obligations of quoted companies in terms of regular periodic submission of performance and financial reports, corporate governance and accountability. It said the delisting of the eight companies from the daily official list of the Exchange became effective from 18th May 2016.
“The Quotations Committee of the National Council of the Nigerian Stock Exchange (QCN) approved the delisting of the afore-listed companies,” the NSE management said.
In the view of Osar Onyema CEO of Nigeria Stock Exchange, good corporate governance will ensure the existence of solid companies in Nigeria.
According to him, the idea of forcing companies to list on the nation’s bourse may lead to infractions in the market, adding that a lot of energy has been committed in building the foundational aspect of the market in terms of transparency, orderliness, fairness, disclosure, and enforcement of rules and regulations.
“In the short term, you will see the huge volatility but that should not distract from those fundamental elements about good companies, making good money, running under a well governed Exchange structure and a well regulated market structure. These factors will combine to shore up investors’ confidence in these challenging times,”he stated.
Levels of delisting
A report obtained indicated that 18 companies have been slated for delisting, including 17 companies that have been earmarked for compulsory delisting and a company that had opted for voluntary delisting over its inability to comply with listing requirements.
Investigation showed that the delisting will lead to more than N33 billion capital flight from the market, thus implying direct loss of similar value to investors who may not be able to unlock such value in the absence of a regular stock exchange.
Already, the Quotation Committee of the National Council, which presides over listing and delisting of companies, has approved final delisting of seven of the companies while it has also approved final delisting process for other com-panies.
The final delisting approval implies that the Exchange has concluded and complied with the regulatory requirements in the delisting process, including issuance of necessary notices, forbearances, fair hearing and probation without any rectification from the affected company.
Recent data from the Exchange revealed that no fewer than 63 companies have been delisted from the NSE.
A review of the list showed that out of the 63 companies, seven chose to delist voluntarily; 47 delisted due to regulatory instruction; while 9 of these companies delisted due to reforms/expansion within the sectors they operated.
Why companies are delisting
Checks conducted by The Nation at the Exchange revealed that most of the companies that delisted voluntarily from the bourse had sited harsh economic climate and parent company buy-out as reasons.
A source in the know said the companies were being delisting for recurring and possibly irredeemable inability to comply with the listing requirements of the Exchange, especially in the areas of timely and accurate rendition of operational and financial accounts and other corporate governance issues.
Stakeholders’concerns over companies’ delisting
The Independent Shareholders Association of Nigeria (ISAN) has bemoaned the delisting of listed companies by the regulatory authorities, saying it does not augur well for average investors and the nation’s capital market. The General Secretary of the association, Adeleke Adebayo urged capital market regulators to allow those listed companies that are not meeting the post listing requirements to remain a ‘public focus.’
He argued that institutional investors may develop interest in such companies and decide to invest in them. “We are losing a lot of money in the market. Nobody is thinking of giving forbearance to investors. We need to make some price adjustments not to continue to delist companies because it is not good for average investors. Let it remain a public focus. Some investors can develop interest and invest in these companies.”
NASD Plc to the rescue
The management of NASD Plc is making moves to get the eight companies delisted from the Nigerian Stock Exchange (NSE) last week to trade on the over-the-counter (OTC) market.
NASD Plc is the platform for the securities of all unquoted public companies in Nigeria. The platform, which commenced operations in 2013, has admitted 27 firms with efforts being made to attract more.
The Nation gathered that NASD Plc is making moves to attract the eight companies delisted by NSE. The companies include: IPWA Plc, G. Cappa Plc, West African Glass Industries Plc, Investment & Allied Insurance Plc, Alumaco Plc, Jos International Breweries Plc, Adswitch Plc and Rokanna Plc.
The stocks were delisted for failure to comply with listing requirements. It was gathered that NASD Plc sees some of the companies as very good candidates for the platform given the experience they have already had on the NSE.
“These companies have already been exposed to the requirements of an exchange and they have been on the NSE for many years before now. However, due to one challenge or other they could no longer meet the listing requirements. But that does not mean the companies cannot recover. Having been delisted from the NSE, they can be traded on the NASD Plc so that any of their investors wanting to exit can do that. Also, other investors who still have confidence in their future can enter,” a market source confirmed.
NASD Plc has been eying over 70 public companies that already have their securities registered with the Securities and Exchange Commission (SEC).
Confirming this development in an interview recently, the Managing Director/CEO of NASD Plc, Mr. Bola Ajomale, said efforts were being made to ensure that such public companies that are yet to have their shares traded on the OTC platform are made to do so.
According to him, various strategies are being adopted to achieve the listing of these shares so that the companies and their shareholders would enjoy the benefits of patronising NASD Plc.
Ajomale had explained that since the platform began operations it had been providing benefits to various stakeholders in the OTC market unlike before.
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Dogara insists on NSE listing of companies operating in Nigeria
In order to deepen and make the Capital Market progress, key players in the Nigerian economy must list their businesses on the Nigerian Stock Exchange, the Speaker of the House of Representatives, Hon. Yakubu Dogara, has said.
Dogara made the remark while receiving members of the Capital Market Master Plan Inplementation Council in his office.
The House of Representatives, he said, is willing to provide all necessary support, through legislations, incentives and any other instruments to compel all major companies in the country get listed on NSE.
His words: “One of the deepest issues that we have to address is that of value that is being created and completely taken away by corporations. In other words, in some jurisdictions, they refer to it as corporate greed; where many companies are generating value investing in Nigeria, reaping profits but you find out that nine people will sit and just share billions of profit. I’m not exaggerating, it is happening right now in Nigeria and I am glad you listed one of them.
“But by listing in the Nigerian Stock Exchange, it even helps in the income improvement of the ordinary citizen because they can invest in that company and whatever profits the company makes goes round and that reflects on the economy. But that is not what is happening.”
The Speaker, however applauded the council for being focused and having a vision and plan for moving the Nigerian Stock Market ahead, adding that if democracy cannot deliver on the goods to Nigerians, then democracy is on trial.
He further urged the council to look into tightening the regulatory power of Securities and Exchange Commission to ensure that manipulators of the NSE are properly sanctioned as a deterrent to future misdeeds, and to restore investors’ confidence in the market.
Dogara said there is a need to define timelines for achieving set objectives in revamping the sector, while explaining that that is the only way to ensure that the whole process does not become another talk shop.
Mr Olutola Mobolurin, head of the council, in an earlier remark urged the Speaker and the House to partner with the council to rebuild the NSE in order to grow the economy and diversify it.
Mobolurin said the roles of the Investment and Securities Tribunal, should be defined by law, and sought an amendment to the law with regards to mutualisation of NSE, and clear legislation on unclaimed dividends, crowd funding, price stability in Commodities Market, Trustees Act and the Housing sector through mortgage bank securities.
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NSE market capitalisation improves by N37bn
Trading activities on the Nigerian Stock Exchange (NSE) on Friday maintained an upward movement with the market capitalisation increasing further by N37 billion.
The News Agency of Nigeria (NAN) reports that the market capitalisation, which opened at N8.584 trillion, improved by N37 billion or 0.43 per cent to close at N8.621 trillion.
Similarly, the All-Share Index rose by 105.33 points or 0.42 per cent to close at 25,062.41 compared with 24,957.08 on Thursday.
Nigerian Breweries recorded the highest price gain to lead the gainers’ table, gaining N5.51 to close at N115.89 per share.
PZ came second with N1.01 to close at N21.36 and Presco gained 75k to close at N35.76 per share.
Cadbury garnered 73k to close at N15.50, while Zenith Bank appreciated by 42k to close at N12.70 per share.
On the other hand, Forte Oil, for the third consecutive day, topped the losers’ chart, losing N11.28 to close at N214.35 per share.
Nestle followed with a loss of N4.74 to close at N615.26 and Lafarge Wapco dipped N2.34 to close at N67.99 per share.
Premier Paints lost 54k to close at N10.39, while UACN dropped 17k to close at N18.03 per share.
NAN also reports that in spite of the growth posted by market indices, the volume of shares traded closed lower with 229.11 million shares valued at N1.50 billion exchanged in 3,493 deals.
This was in contrast with a total of 338.34 million shares worth N1.99 billion transacted in 3,428 deals on Thursday.
UBA was investors delight, accounting for 31.55 million shares valued at N107.28 million.
Transcorp trailed with a turnover of 29.10 million shares worth N28.91 million, while Zenith Bank accounted for 26.50 million shares valued at N333.59 million.
Further analysis showed that investors staked N19.95 million on 25.05 million shares of Wema Bank and FBN Holdings sold 20.02 million shares worth N73.05 million.
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Bank restates commitment to MSME growth
The banking industry has restated its commitment to growth of the Micro, Small and Medium-Scale Enterprises (MSME) in the country.
The Managing Director of Fidelity Bank Plc, Nnamdi Okonkwo, said the bank had raised N30billion in corporate bonds on the Nigerian Stock Exchange (NSE).
Okonkwo said that the capital raising exercise was expected to enable the bank fulfil its promise to increase MSME lending to 50 per cent by 2017.
He added that the bank had earmarked 80 per cent of the net proceeds of the bond to finance MSMEs which have been peddled as the next cash cow.
In a similar development, Heritage Bank Ltd said on Wednesday that it had boosted its entrepreneurship support by the launch of N500 million Young Entrepreneurs and Students (YES) Grant.
Its Managing Director, Mr Ifie Sekibo, said in Lagos that the initiative was a partnership with the Nigerian Youth Professional Forum (NYPF), to support students and young entrepreneurs toward socio-economic freedom.
Sekibo said the Heritage Bank’s support for the programme arose from the fact that the initiative aligns with the vision of the bank, which is to help create, preserve and transfer wealth across generations.
He added that the bank would also support the project in terms of training the beneficiaries, disbursement of the grant, monitoring and evaluation of the project’s milestones agreed with the beneficiaries.
Also same day, the National Assembly finally passed the 2016 budget submitted by President Muhammadu Buhari.
The 2016 budget of N6.06 trillion was reduced by N17 billion, to make it lower than the N6.07 trillion estimates presented by the President in December.
The banking industry during the week also witnessed a policy decision that made the Central Bank of Nigeria (CBN) to raise the Monetary Policy Rate (MPR), an anchor rate for commercial banks.
The CBN, through the Monetary Policy Committee (MPC) raised the MPR, the reference interest rate by 100 basis points from 11per cent to 12 per cent.
It also raised the Cash Reserve Ratio (CRR) by 250 basis points from 20 to 22.5per cent, while retaining the Liquidity Ratio (LR) at 30 per cent.
The CBN Governor, Godwin Emefiele, said the Committee, “in its assessment of relevant internal and external indices, came to the conclusion that the balance of risks is tilted against price stability.
The MPC, therefore, voted to tighten the stance of monetary policy.
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Nigerian equities lose N228b as China crisis goes global
Global stock markets yesterday took a major plunge after China suffered its worst trading session in eight years.
An unprecedented collapse in Chinese shares sent tremors through financial markets, triggering the ugliest day of global trading since the depths of the financial crisis eight years ago.
Billions were wiped off indices across the world in a day of frenetic selling, which saw the Shanghai composite suffer an 8.5 per cent decline, its worst one-day performance since 2007. The mass panic, dubbed “Black Monday” by China’s official state news agency, was driven by investors’ dashed hopes that Beijing would inject a fresh round of stimulus into its economy following a series of disappointing data last week.
In Nigeria, after losing N283 billion last week, equities opened this week with a whooping loss of N228 billion in the five-hour trading session. Average decline stood at 2.22 per cent as relatively higher losses by 46 stocks, including the market’s largest stocks, overwhelmed modest gains by nine stocks.
The opening downtrend pushed the negative average year-to-date return at the Nigerian stock market to -15.71 per cent. The negative market position appeared to be increasing, unnerving the more optimistic investors, lowering demand and increasing open-order supply, which has virtually turned the market into a discount window.
Analysts were negative on the market’s outlook in the short-term, although there was almost unanimity on the good prospects of Nigerian equities in the medium to long terms.
“We anticipate another round of bearish trading at tomorrow`s session (today) as there are no catalysts in the horizon to spur positive sentiments. The tumbling in global oil prices at the international markets may also be taking its toll on the market,” SCM Capital, formerly Sterling Capital Markets, stated in a post-trading review.
Aggregate market value of all quoted companies on the Nigerian Stock Exchange (NSE) almost dropped below its psychological N10 trillion position to close at N10.013 trillion as against its opening value of N10.241 trillion, representing a loss of N228 billion or 2.22 per cent.
The All Share Index (ASI), the common value-based index that tracks prices of all quoted equities, shrank to 29,214.13 points as against its opening index of 29,878.33 points, a day-on-day decline of 2.22 per cent.
China’s benchmark index has now lost all of its yearly gains after a relentless ascent that saw its valuation rise to record levels earlier this year. Asian markets crashed on the news, with Japan’s Nikkei closing down 4.5 per cent and entering official “correction” territory. Hong Kong’s Hang Seng sanki 5.2 per cent, its steepest sell-off in 30 years.
Emerging markets, most exposed to a waning Chinese economy, saw their currencies continue an abysmal summer rout. Russia’s rouble fell to an all-time low of 70.74 to the dollar, despite desperate attempts by the Kremlin to prop up its value.
Contagion quickly spread west, decimating European indices, which all suffered record post-crisis losses. The FTSE 100 dropped 4.7 per cent, wiping £74 billion off its market capitalisation and capping its worst one-day performance since March 2009.
The index staged a minor rebound, having lost more than £55 billion in the first two hours of morning trading. Britain’s benchmark index has now collapsed by 17 per cent since hitting a high of 7,104 in April and is slipping towards official bear market territory, defined as a 20 per cent decline from its peak.
Europe’s FTSE EuroFirst300 stocks endured a 5.6pc loss that erased €450bn from the continent’s biggest companies. Italian stocks led the falls, down 6pc, while France’s CAC 40 suffered a 5.4pc decline, closing at 4383.46. Germany’s DAX also entered correction territory, bleeding 4.7pc.
“Stock markets are falling apart at the seams,” said Jasper Lawler at CMC Markets.
“There was one point today when there just seemed to be no buyers and markets just went into freefall.”
Fears soon engulfed Wall Street, where the Dow Jones lost 1,000 points, minutes after the opening bell. Pre-market futures trading in the Dow and the S&P 500 had to be suspended as investors became embroiled in a manic sell-off. The Dow later rallied to fall by 2.6 per cent in New York’s afternoon trading.
A key measure of US equity volatility, the CBOE Volatility Index, or VIX, shot above the 50 mark for the first time since 2009 before dropping back to 33 as US investors turned their focus back to domestic US issues.
“With those markets closed, it’s now focused more on US fundamentals. The US economy remains relatively strong compared to others around the world,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
The Dow Jones industrial average was down 346.07 points, or 2.10 percent, at 16,113.68. The Standard & Poor’s 500 Index was down 47.72 points, or 2.42 percent, at 1,923.17. The Nasdaq Composite Index was down 94.91 points, or 2.02 percent, at 4,611.13.
Oil prices also recovered somewhat after plunging to six-and-a-half year lows. Safe-haven US government and German bonds, as well as the yen and the euro, rallied as currency concerns kicked in due to China’s recent currency devaluation.
US crude was last down 3.7 per cent at about $38.95 a barrel after falling as low as $37.75 earlier in the day and Brent was off 4.2 percent at $43.57 after falling as low as $42.51 to take it under January’s lows for the first time. Worries about weaker demand from normally resource-hungry China added to global supply glut concerns.
The S&P’s energy index was the weakest performer with a 2.9 per cent decline in afternoon trading.
With serious doubts emerging about the likelihood of a US interest rate rise this year, the dollar was down 1.5 per cent against other major currencies after falling as much as 2.5 per cent earlier in the day.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 5.4 per cent to a more than three-year low. Tokyo’s Nikkei ended down 4.6 per cent and Australian and Indonesian shares hit two-year troughs.
London’s FTSE 100, with its large number of global miners and oil firms, ended down 4.7 per cent for its 10th straight decline – its worst run since 2003. The MSCI all world stock index was off three per cent.
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Dogara rues non-listing of telecom, oil firms on NSE
[dropcap]T[/dropcap]he Nigerian Stock Exchange (NSE) would have been more vibrant if multinational oil and gas and telecommunication companies were listed, the Speaker, Yakubu Dogara has said.
Dogara who spoke yesterday while receiving members of the Nigeria-United Kingdom Capital Market Project in his office applauded the Memoranda of Understanding (MoU) between the stock exchanges of both Nigeria and the United Kingdom.
The Speaker while lamenting the refusal of the multinational oil and gas and telecoms companies to list on the stock exchange, said there was no justification for such.
According to him, big companies in these two major sectors must have to list on the capital market to make capital available for investors, create employment and deepen the market.
He said the House may consider passing a law that will compel multinationals in oil, gas and telecommunication sectors to list certain percentage of their value on the stock exchange.
His said: “Apart from capital inflow sought, the market needs to be deepened, as most of the big international companies in Nigeria are not participating in the NSE. This is sad because these companies account for a huge percentage of revenues in oil, communication and energy.”
Dogara assured that all areas of value-added partnership aimed at wealth increase and redistribution, as well as the creation of employment and economic diversification, will have legislative interventions.
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Equities crash to lowest prices as investors lose N814b
Several equities open trading today at the Nigerian Stock Exchange (NSE) at their lowest prices in a year as quoted stocks lost more than N814 billion in five straight days of losses last week. At least a quarter of companies quoted on the stock market closed weekend at their lowest prices or around their lows. With another quarter stagnated at their nominal prices during the period, the continuing downtrend and the emergence of new lows for several stocks highlighted the grim market situation at the stock market.
Several leading stocks such as UAC of Nigeria, Guinness Nigeria, National Salt Company of Nigeria (Nascon), Seplat Petroleum Development Company, Nigerian Aviation Handling Company, Okomu Oil Palm and UACN Property Development Company among others are now trading at their lowest prices in a year.
All key indices at the NSE highlighted the widespread bearishness across the sectors. The All Share Index (ASI), the common value-based index that tracks prices of all quoted companies, indicated a week-on-week average decline of 7.42 per cent. It closed weekend at 30,763.38 points as against 33,228.29 points recorded as opening index for the week.
Aggregate market value of all quoted equities also dropped from the week’s opening value of N10.970 trillion to close at N10.156 trillion, indicating a loss of N814 billion.
With the decline last week, average year-to-date return at the stock market worsened with the ASI indicating a year-to-date return of -25.57 per cent. The NSE 30 Index, which tracks the 30 most capitalised stocks, showed year-to-date return of -26.73 per cent. The NSE Banking Index carried a return of -27.66 per cent. Other returns included NSE Insurance Index, -7.61 per cent; NSE Consumer Goods Index, -28.34 per cent; NSE Industrial Goods Index, -27.16 per cent and NSE Lotus Islamic Index, which recorded the highest average loss of -30.57 per cent. The NSE Oil & Gas Index is the only one with a gain of 11.45 per cent.
With nearly seven decliners for every advancer, 10 equities appreciated during the week compared with 68 stocks that depreciated. One hundred and nineteen stocks remained unchanged, nearly half of them stunted at their nominal prices.
Total turnover last week stood at 1.81 billion shares worth N28.92 billion in 20,677 deals. The financial services sector was the most active with 1.37 billion shares valued at N13.78 billion traded in 11,742 deals; representing 75.69 per cent and 47.66 per cent of the total equity turnover volume and value respectively. The consumer goods sector recorded a turnover of 137.12 million shares worth N9.37 million in 3,583 deals. Conglomerates sector placed third on the activity chart with a turnover of 93.13 million shares worth N567.17 million in 1,256 deals.
The trio of Guaranty Trust Bank Plc, FBN Holdings Plc and Diamond Bank Plc were the most active stocks and jointly accounted for 624.39 million shares worth N9.19 billion in 5,090 deals, contributing 34.50 per cent and 31.77 per cent to the total equity turnover volume and value respectively.
Also traded during the week were a total of 1,299 units of Exchange Traded Products (ETPs) valued at N452, 196 executed in 21 deals. Similarly, a total of 800 units of FGN bonds valued at N825, 011 were executed in a deal.
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Alluring but risky trillion dollars art business
Nigerian Stock Exchange Chief Executive Officer, Mr Oscar Onyema says though the art industry is worth over $3 trillion, with a yearly $30 billion turnover, investing in it is not as good as investing in property, land, bonds, equities or precious metals. Assistant Editor (Arts) OZOLUA UHAKHEME reports.
The guests at the 10th Ben Enwonwu lecture titled: Arts as an alternative investment, held at the Taraba/Rufkatu Hall of the Wheatbaker Hotel in Ikoyi, Lagos, were at home with the topic. So, also was the guest speaker, the Chief Executive Officer of the Nigerian Stock Exchange (NSE), Mr Oscar Onyema, who was conscious of the expectations of the mixed audience- artists, investors, collectors, stock brokers, auctioneers, gallery owners, among others.
Onyema said art is no longer appreciated for its aesthetic value and the expression of its lofty ideals as it is more than ever before, considered an investment.
He said the amount paid for certain art pieces have attracted global attention. As an object of investment, art has become, particularly alluring. He cited Ben Enwonwu’s Seven wooden sculpture sold for £361,250 and Mystery for £300,000 and Edward Munch’s The Scream for nearly $120 million as examples of some of such art pieces. Art, according to him, has become the new hip, must-have investment.
He said art as an investment has an increasing demand, coupled with an absolutely limited supply, and the ability to survive the economic downturn.
“Art as an asset is in a class all of its own. As assets are grouped together based on the characteristics of their underlying companies, art is grouped based on the period in which it was made, the artist (whether they are living or dead), style and medium. Art acts as an asset because it is owned and holds monetary value, and it can be exchanged for such a value. The main attraction and the prime reason for the resurgence of art as an investment is its low correlation with other financial assets,” he added. He however cautioned that putting money into art is not as straightforward as investing in property, land, bonds, equities or precious metals, such as gold.
Onyema listed nine characteristics of arts that make it a high risk investment. He said:
“•Art is a heterogeneous product, artworks are unique,
•Loyalty to an artist is low, and the perceived value of the product very much depends on an art dealer’s taste,
•There is a lot of competitive pressure in the industry, and barriers to entry are high due to high fixed costs.
•Costs of exiting the industry are also high, as it is difficult to liquidate assets.
•There is a mutual interdependency between firms, dealers and art fund managers. (The big three auction houses–Christies, Sotheby’s, Philips –are said to be price-makers and not price-takers.)
•The art industry tends to compete on uniqueness of artwork, not on price.
•The price of art within art markets is affected by uniqueness of product (the work of art), limited supply of works by the artist, production and sales costs, the market, and the macroeconomic environment.
•The issue of value is often subjective, because of its heterogeneous nature and
•There is an inelastic supply for art, since most tradable art is trapped in private collections.”
He noted that despite the emergence of new products such as securitisation of artwork, structuring of private art collections into funds and other collective schemes, art financing–extending credit using art collections as collateral and art financing that guarantees minimum sales prices at auction, in practice, perfect knowledge of market never exist.
“The art market can be characterised as highly uncertain, and knowledge is scarce. The imperfections in the market, thus, become a tool of competition,” he said.
According to Onyema, the dividend from art is the enjoyment the collector gets from it because it does not pay dividend. “But you find increase in valuation of art over a time. It is the equivalent of what you get as dividend in stock market. Investing in art is very risky and volatile. And there are many things that go into what make people collect art,” he said.
Onyema pledged the support of NSE for the establishment of an Art Fund, noting however, that the exchange is not the platform for its establishment because it cannot be quoted on the exchange.
He said some of the advantages of the fund include that it allows access to art expertise, insider knowledge of the art market, low transaction costs if you are an investor in the fund, due diligence services, good advisory services, and the potential for higher returns. However, he identified liquidity, pricing, performance, costs, track records and conflict of interests as some of the disadvantages.
He observed that participating in art fund gives access to co-investment and adds diversification to a portfolio. “But due to the high volatility of art’s value, it is necessary to invest over a longer period to adequately hedge.
“•Understand international factors affecting art such as exchange rate movements, cultural factors affecting art and market preferences.
•Rising demand for artworks and increasing prices are driven by increasing global wealth.
•Artwork in the lower price categories react negatively to economic slowdown –demand drops while supplies increase, thus forcing selling.
•Artworks in the top price categories hold up well during weak economic environments.
•Art prices tend to have a positive correlation with inflation.
•When the stock market is in a downturn the art market booms –investor appetite shifts to tangible investments,” he added.
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NSE probes stockbrokers’ accounts
• Brokers decry undue interference
The Nigerian Stock Exchange (NSE) is investigating financial and trading transactions by stockbrokers, a stormy move that has pitted the management of the Exchange against the largest trade group in the capital market.
The NSE has directed stockbrokers to submit their bank account statements alongside their regular monthly trading report and clients’ accounts. This is the first time that the Exchange would be requesting for personal bank accounts of the stockbroking firms.
Sources told The Nation that the request for the bank account statements of the stockbroking firms was irregular and had taken the industry by surprise.
The sources said stockbrokers had raised objections to the request, pointing out that there was no provision in the NSE’s rules and regulations that support the request.
According to reliable sources, the NSE might be interested in reconciling stockbrokers’ monthly transaction reports with their account statements in order to ensure that stockbroking firms have not been engaging in what a source described as “creative accounting”.
Sources said the industry-wide directive might also be a cover for the probe of stockbroking firms, which are suspected of muddling and mixing their trading accounts with investors’ accounts.
The NSE’s rules and regulations require stockbrokers to separate their trading accounts from their clients’ accounts.
The bank statement will also reveal the liquidity status of stockbroking firms, a major contentious point between the Exchange and stockbroking firms.
The Association of Stockbroking Houses of Nigeria (ASHON), the umbrella body of stockbroking firms, at the weekend directed stockbroking firms “to stay action” on the NSE’s directive pending deliberations between the NSE and the stockbrokers.
A source at the NSE said the Exchange was working in the interest of the market but declined to be categorical on the reason for the unusual directive.
The source however said the Exchange had meeting with some stockbroking firms on Thursday and they might be the ones trying to pre-empt possible regulatory actions by insinuating motives into the NSE’s directive.
The NSE had earlier indicated it would sanction stockbroking firms that fail to submit their stockbroking transaction report within the stipulated period. The NSE uses the transaction report to track inflow and outflow of foreign transactions, major deals in the market and to monitor the market to ensure suspicious sources are not using the stock market to launder ill-gotten funds or finance terrorism.
The submission of transaction report is in line with Article 14 of the rules and regulations governing dealing member firms of the Exchange which requires every dealing member to keep proper records and books of account in respect of all stockbroking transactions.