Current speculative market trend which characterized activities in the market has been fingered as a developments which distorts long term advancement of the market.
Cross section of capital market stakeholders told Daily Times that speculation usually disrupt market flow and encourages profit taking on short term basis.
Investments, they said should be long term and not short term and any market activity which supports short terms investments disrupts market long term advancement.
The capital market experts reacting to current speculative buying which characterized activities in the equities market, said that such buying’s were purely speculative of better developments in companies, with the intention either to reap from dividend proposal or price growth.
Taking clue from the high volumes recoded by Guinness Nigeria, GTBank and other companies on Tuesday, brokers said that the increased buy mandates on the companies’ stocks were fixed on taking position.
National coordinator of the Progressive shareholders Association of Nigeria, Mr. Boniface Okezie told Daily Times that investors are currently engaged in speculative buying because of the opportunities the market currently offers.
According to him, almost all equities are currently trading below their fair value and this offers investors the opportunity to buy now and sell later.
Speculative investment, Okezie said is based on low pricing of equities, profit taking and fundamentals of companies with the hope that the prevailing low equity prices would reverse upwards in near future.. Investors are taking position to buy the shares currently trading at very low prices, with the hope of reaping from their investments in future”
A stock broker who spoke on condition of anonymity said that increase in demand for Guinness shares irrespective of poor performance of the company in its end of year result was purely to take position for possible earnings from price growth which reached a new low.
He said that the new low attained by the company following release of its audited result opened a new investment window for investors with hope of reaping from equity price growth. The rise in demand, the broker said, created a heard movement on the stock, which is expected to be deflated when speculative buyers start taking profit.
Another broker told Daily Times that before the market descend to its present low, market forecasts and analysis usually achieve higher accuracy, but with prevailing trend, analysts and trends no longer work, and this also informed speculative buying which may not be backed by and strong analysis but purely on trial and error.
The broker said that most of the brokers and have exhausted their knowledge on the market and that a lot of stocks have declined to very low level demystifying market forecasts and now people are trading based on hope of possible reversal.
“ people are scared, some stocks have attained a low that no projection saw, so what people are deploying in speculation is guess work. ‘ speculative buying is there for some crackers, calculate very well and look at blue chip companies and not penny stocks, one could come out better” the broker said.
The stock broker said that investment speculation drives equities up while profit taking also drives low. Profit taking help to boost investment value of investors while it depresses equity prices of companies. “Speculative buying does not support long term holding which help to consolidate stock prices
Leave a Comment
You must be logged in to post a comment.