Nigeria Stock Exchange Stock Movement Is Disconnected From Earnings

Have you noticed what has been happening in Nigeria’s stock exchange? Most of the companies that are reporting good earnings are not getting any love in their stock prices. It does seem that investors are not moved by the numbers the companies are reporting. This has been the big challenge in the nation’s exchange – the correlation between earning is not immediate on investor’s decision. You can return good growth, profits; yet, nothing happens. It is like the investors are not aware of your progress.

In the exchange, you can report a great number and still see your stock go down. Why? The  investors are looking beyond the numbers. It is like  – what is the fundamental behind those numbers?

What happened in 2008 was an eye opener to investors. They like good numbers but also do not believe all they see or read. They think the accounting profession in Nigeria is still evolving and weak. After all, most of the banks that needed help from CBN in 2009 were all audited and certified to be in clean state. Yet, there was rot in the system.

What moves markets in Nigeria is paying dividend. If you are a dividend paying company, you will get a lot of traction. Why? That is one thing investors truly believe in. At least they are paid and they get the money in their pockets. Why the stock can go up and go down,  a divided guarantees them financial security.

In the New York Stock Exchange, the same effect is taking shape. The present earning season is disconnected from the market. Most of the companies that returned good numbers were punished because of the economic crises. Investors are looking beyond the companies to the whole health of the economy. So, that shows one thing – companies exist in economies. Except Priceline, most companies have been beaten in the last few days in NYSE because of the debt ceiling debate, euro debts and general lackluster performance of the economy.