Yuletide selloff increases turnover in equities market
WHATEVER positive rallies that may have been generated by investors desirous to procure currently low-priced shares ahead of a predicted market rebound have been truncated by the massive selloff by other investors in need of funds for Christmas and end-of-year holidays.
The selloff has resulted in a fierce contest for dominance by the bulls and the bears, which in effect has generated an upsurge in market turnover and made the market capitalisation and the all-share index to be vacillating.
But the pressure of the Yuletide-induced selloff and the prevailing cash squeeze in the system have further bolstered the bears to gain upper hand over the bulls.
The bulls, according to Investopedia are investors, who think that the current low-priced securities will rise and thus purchase them under the assumption that they can be sold later at a higher price. The bear investors, on the other hand, believe that the value of the securities is likely to decline further and, so, engage in a frantic selloff.
A market analyst, Christopher Azuka, explained that the current overwhelming bearish market or trend is energised by the desire of investors to raise money for the approaching Christmas since the prevailing cash crunch in the system occasioned by government non-spending, banks not having enough funds to lend and the lull in international crude oil business have combined to block other sources of fund supply.
According to him, the cash crunch is compelling the retail investors, who desperately need money for the festivals to embark on the selloff of their equities just as institutional investors, who are short of funds, are disposing of their stocks to raise funds for transaction, precautionary and speculative motives.
Historically, this being the period to prepare for the Christmas and the New Year, always experiences bearish market but with occasional resurgence of the bulls.
This year, however, the bulls, in view of the long-drawn bears that have persisted in market, were encouraged to emerge on Friday, December 4, to mop up the low-priced equities in the market.
This led to the market recording on December 4, a 0.05 per cent upward swing in the sliding NSE all-share index from all-time low 27,385.69 to 27,631.05 and market capitalisation rising from N9.415 trillion to N9.500 trillion.
The rise continued till Monday, December 7, with market capitalisation going up by N69 billion or 0.7 per cent from N9,500 trillion recorded on Friday to N9,569 trillion while the all-share index rose by 202.89 points from 27,631.05 to 27,833.89.
Attracted by the rising profile, bear investors stormed the market with more supply of equities on Tuesday, December 8. This resulted in a glut, which depreciated the all-share index to 27,533.03 and market capitalisation to N9.466 trillion.
As at Friday, December 11, the NSE all-share index and market capitalisation plummeted further by 1.31 per cent to close the week at 27,269.71 and N9.376 trillion respectively.
On Monday, December 14, the glut persisted, resulting in a further decline in market capitalisation to 9.344 trillion and the all-share index to 27,179.28.
The negative trend notwithstanding, experienced speculators are still optimistic that the market will rise even before the second quarter of 2016. Their optimism is based on the fact that the prevailing bearish trend is getting a little long than has been the case in the past.
“The bulls are already lurking around nearby,” one of the analysts said.
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