Crash

January 2009 will go down as the worst month in the history of the Nigerian Stock Exchange. The All share Index lost 30.6% to close at 21,814. The last time the Index was below 22,000 was in 2003. The drop of 30.6% was incredible given that the cumulative losses suffered in the entire forgettable 2008 was 46%.

The value of transactions exchanged did not fare any better. Only N29.8 billion was exchanged an average of about N1.4 billion daily. This compares miserably to the N286 billion exchanged in 2008 an average of N13 billion daily. It is safe to say that what we witnessed in the last 7 months is a crash.

For the value investor times could not be more exiting. The market PE is currently about 14.3 while the dividend yield is 6%. The market has not been this attractive for quite a while. In my view the market is currently oversold and there are opportunities in most sectors. Definitely, this is not the time for the trader as there has been little volatility to trade. However, for long term investors, this is the time to seriously consider buying quality dividend paying stocks at prices last seen 5 years ago.

Year............PE.....Yield %
30th Jan 2009...14.3... 6
31st Dec 2008...16.7... 4
25th Jun 2008...27.0... 2.1
5th Mar 2008...35.9... 1.6
31st Dec 2007...30.0... 2.1
29th Dec 2006...23.4... 3.88
30th Dec 2005...16.3... 4.75

Whether investors will have the courage and liquidity to go on a buying spree is yet to be seen. One of the things I learnt during this long bear market is that fear is indeed more powerful than greed.