The suspension of the recapitalisation exercise of stock broking firms by the Securities and Exchange Commission (SEC) is showing positive signals in the market. Already, prices of stocks have started moving up and the development is expected to herald more changes, writes Akinola Ajibade

The Securities and Exchange Commission (SEC) had by last week’s decision to suspend the recapitalisation of stockbroking firms and Issuing Houses stimulated changes in the nation’s capital market. The suspension has brought about a marginal increase in the prices of stocks and it is expected to further inspire changes in the operations of the market.

Prior to the policy somersault, which SEC had hinged on the need to create room for a wider consultation among stakeholders, stockbroking firms and issuing Houses were in a frenzy of sorts. The N1billion and N500million capital base for the two segments respectively had sparked off a row.

There was counter accusations between the operators and the regulatory bodies over the fees which the former considered too high to provide.

Even at that, SEC was not bothered as the body was waiting for December 2008 to slam uncapitalised operators.

The development made operators to devise ways of meeting up. Margin trading surfaced on their agenda as they rely on such facilities from banks. They frantically traded with loans to meet their operational needs and further garner enough funds for the consolidation. Prices of stocks were driven up through overt or covert means until recently when a combination of factors caused market slide.

Rising prominently among the causes are private placements, suspension of margin among others. The problems took its toll on the activities in the market. In fact, the market could be said to have gone to sleep as stockbrokers were battling with falling prices of stocks and how to escape SEC’s sledge hammer.

However, the situation has changed following last week’s suspension of the recapitalisation of the exercise. Prices of stocks have started moving up. The activities on the trading floor since Monday said it all. Investors are trying to take a position as prices continue to rise. Stockbrokers are full of excitement as’ bull’ returns gradually.

Access Bank rose from N16.80 on Friday, June 30, to close at I8.71 on Thursday, July 3.Union Bank rose from N34.63 to N38.85 during the same period. UBA moved from N31.71 toN34.90, GTB from N26.78 to N29.30 while First Bank shot up to N43, 45 from N40.74.

In the Brewery segment, Guinness moved up fromN123.20 to N127.10. UACN (N47.20 –N47.01) Flour Mills (N79.80-N83.60), Costain N25.10-N28.98). Several others also appreciated marginally.

The rise in prices, industry observers, argued has moved marginally due to suspension of the consolidation exercise. They said that firms as a result, of the suspension, now have money to trade with. The development, industry watchers posited have paid off as more stocks were on demand as against a situation where investors were only offloading their stocks in the past three weeks for fear of incurring more losses.

An analyst, Mr Tunde Taiwo put the issue in a better perspective saying that stockbroking firms are currently financially buoyant and that it is reflecting in the performance of the stocks in the past one week.

Taiwo, a staff of Century Securities Limited, said the suspension of the consolidation exercise, has brought relief to most operators as they now concentrate on how to improve their turnover.

Interestingly, the development has boosted the confidence of investors as many have expressed misgivings about the consolidation. In fact, many of the investors had feared that some firms may not be able to meet up with the consolidation. Through this means, they thought they would lose their investments and subsequently confidence in the market. But that has since changed as investors are showing confidence again.

Besides, the development is expected to yield more confidence in activities in the market. Many had argued that the huge consolidation fees have forced many stock broking firms to explore several options of sourcing for money. They sometimes whip up sentiments in the market to drive up prices of stocks. They make projections that are not attained to ensure that stocks in which they have interest, increase in value. In most cases, they raised the hope of investors that certain companies are about to come up with share bonus and dividend to achieve their goals.

Firms often look for lowly priced stock which they buy in large quantities and later offload when the prices have increased. And when they have realised that the stock’s price has reached its climax and have gained tremendously, they sell them. While they are making their profit, innocent or rightly put ignorant investors followed suit by selling off their shares and record losses.

The sharp practices though may not be totally curtailed as stocks are mopped globally. But there is likelihood of reduction in prices in the market, says Boniface Okezie, a shareholder.

Okezie, National Chairman, Progressive Shareholders Association of Nigeria said that fundamentals would be driving the prices of stocks as time goes on instead of market hearsays. He said that the performance of a company would determine whether such a stock would appreciate or not, stressing that investors are now having more knowledge about market activities.

Taiwo corroborated him, saying that fundamentals would play a major in determining how far a stock progress in value. He said that such practices would stop as SEC is set to review the consolidation exercise, adding that if the fees were eventually reduced many firms may stop engaging in sharp practices such as wiping up sentiments to drive the market.

He foresees a situation where firms would rely on fundamentals to drive the market in order to escape punitive measures from the regulatory bodies.

Soludo lends credence to this assertion during a stakeholders meeting in Lagos recently as he claimed that confidence has been a restored in the market through a collaborative efforts of various regulatory bodies.

He said that the share index has gained about 1.3 trillion in the past one week due to such efforts. Though, Soludo was not specific about the particular measure that culminated in resurgence in prices of stocks, but market observers have continued to see the suspension of the recapitalisation fees as the major factor that is driving the prices.