Rise in share supply

Investor's interest in investing in the Nigerian equities market is expected to rise again as transaction in stocks on the floor of the Exchange last week witnessed an interchange of appreciation and depreciation in share value. The move by both local and international investors to reduce their portfolio holding in the market, however, does not call for alarm, as they are only responding to recent gains recorded in the stock market, arising from return of liquidity which was reduced to its barest minimum during the election period.
Experts in securities had at the beginning of the year said that the second quarter of 2011, in the life of the market, would experience some appreciation especially given the derivative from the buy back of some toxic asset of banks by Asset Management Company of Nigeria (AMCON). The buy back of about N2 trillion non-performing loan from the banks by AMCON provided the necessary leverage other stocks were expecting to thrive on, even as most of the banks have returned to their old businesses of lending, which usually drive economic activity in the country and by extension, the capital market.
As expected, the rush to have shares disposed off will continue to take its negative tolls on transaction value at the NSE.The pressure to place shares on the sale mandate of most brokerage firms will definitely reverse the gains which the market capitalisation and All-Share Index of listed companies had chalked at the close of previous week's transaction.
The rise in the sell turnover mandate in the equities market will further result in majority of the blue chip companies stocks depreciating in value, thus forcing the twin market indicators to wear a new status which, in no distant time, will begin to cause anxiety among investors.
Share glut may even become the order of the day in the market as it is always the case when the pressure for sales of shares is high in the market, a situation that usually see supply weighing demand for them. This will also affect prices of virtually all the listed stocks in the market. The insurance sector will no doubt become the worst hit.
The present state of health of the market has further resulted in most brokerage firms becoming busy on the floor of the Exchange, and whether on the sale or buyer side, their commission on every transaction is always guaranteed.
A further x-ray of the market last week showed that  some investors in dire need of fund sold their holdings far bellow the quoted price on the exchange, believing it was  the only way they could have their holding exchange for money.
Other investors who could not wait until their shares were disposed off and wanted to get their cheques  were immediately  charged  one per cent on any amount of money paid out to them.
The decision of the ordinary and institutional investors who  last week chose to invest in the market not based on personal conviction but on pedestrian information may continue to haunt the growth of the market in terms of value appreciation. But as it is now, genuine investors, except for a handful, are the ones approaching the stock market for investment and the performance indicators will soon begin to experience a positive value rise.