NIGERIA: Stock Market Rebound May Revive Public Offers

 The strong rally observed in the Nigerian stock market last week may spur the revival of public offers as firms seek more funds to expand their operations.

Traditionally, quoted companies issue new shares when stock prices are high as well as when market sentiments are positive. Some banks recently got the approval of their shareholders to raise fresh capital.

The Nigerian Stock Exchange (NSE) market capitalisation had last Wednesday hit its 2008 peak. The market capitalisation, which measures the total value of equities advanced to N12.641 trillion on Friday, representing a year-to-date appreciation by 39 per cent, compared to the N9.109 trillion it was at January 2. Also, the NSE All-Share Index advanced to 39,564.79 basis point as at Friday, 28 per cent higher than the 28,501.21 basis point it was as at the beginning of the year.

Public offers at the NSE had dried up since the market crashed as low equities’ prices and poor investor confidence had discouraged firms from raising capital in the public markets.

While some banks recently raised debt by issuing Eurobonds, to enable them finance oil, power and other infrastructure projects in the country, others are still considering other fund raising opportunities. For instance, Diamond Bank Plc, Wema Bank, Sterling Bank, Stanbic and Skye Bank are seeking to raise funds.

“We expect to see some companies coming to the market to take advantage of the current bullish run in the market. But we are yet to achieve the kind of investor confidence that we saw in 2008,” a financial analyst, Mr. Chijioke Obiagwu, said.
On his part, the Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, noted that companies had shown preference for debt financing and rights issue.

“2013 has been a phenomenal year for global equities. As expected, it has been a year of ‘great rotation’. Low and falling bond yields have pushed investors into equities. Most indices and markets are trading at their multi-year high. Year-to-date returns across markets reached their highest in May. Rotation to equities increased as portfolio managers who had hitherto underweighted equities adjusted their portfolios,” he argued.

According to Rewane, the continued drop in yields of fixed-income securities has continued to stimulate the upward trend in the equities. Furthermore, he pointed out that banks and building materials companies were the principal sources of growth
“Without banks and building materials sector, average revenue growth was 0.1,” he added.

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