Dear most valued customer,
We have the honour of announcing to you, that there is "a diamond in the sky". To many, all they can see is despair, despondency, depression in the Capital market. We have come however, to give you hope and to allay your fears regarding the trend. In doing this effectively, it is however pertinent that we address the reason the market is where and what it is today. That we believe would facilitate an understanding of our stance that all shall be well!
In the beginning
How did we get to the present situation? Permit us to say the market was distorted by the inflow/influx of Hedge fund managers and margin traders, (those you may want to call speculators with a very short term horizon contrary to what the Capital market holds). They brought in borrowed funds to play in the market and the law of economics took its toll " demand was drastically increased, which in turn heralded the beginning of an era of over pricing of the stocks " too many hands chasing too few stocks! The price crash became imminent when the borrowed / hedge funds matured and there was need to meet loans obligations which resulted in dumping of stocks and then the resultant effect was the crash.
The true picture is that the prices of stocks are low, ridiculously low. The cheering news however is that they may be nearing bottoming out. It may interest you to know that a stock price cannot drop below its nominal/Par value.
Imagine that some months ago you needed N33m to buy 1milion units of First Bank, N16m for Skye Bank & N51m for Dangote sugar. Now you need only about N15m, N4m & N15m respectively to buy the same units of stocks. What this means is that in terms of holdings, you can buy more units with less amount of money.
Another expert said, “From the market fundamentals, once the fundamental things are done, there is going to be a major rebound……………. The most important thing is that those that have not gone into the market yet can now join for a foreseen recovery”… Bismarck Rewane (Pg 51, Business Day Wednesday 25 March 2009)
Some weeks ago, our Chairman, the Managing Director of Skye Bank Group in his message to us said “The stock prices continue to slide; this is understandable. People have lost confidence in the market, and the bank shares are in trouble here. However, my view is that this is the time to buy, buy low to reduce the average cost of your holding. Yes these are tough times but tough times produce tough people”……. A. A. (Wednesday 18 March 2009)
The Ghanaian Capital market is a case in study. It is in a much more stable position today because the hedge fund managers and margin trade speculators did not find their way into the Capital market.
As many have recorded great losses and are still counting loses, we would like to say that the market is only been regularized, it would pick up again. May be no one knows when exactly, but it surely would pick up. It is the time to take position. Invest in your future; avoid inflation eroded income on retirement. Let us look at the opportunity that abounds in the adversity of the Capital market. Low stock prices, how much lower can these prices go? We must look at the future, looking beyond the present situation to make provision for our tomorrow. The future is truly bright!