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MARKET DECLINE: Stock dealers make case for security lending

MARKET DECLINE: Stock dealers make case for security lending

By Nkiruka Nnorom

SEC
STOCK

ON the backdrop of the lull in the equities market, stockbrokers have indicated that securities lending could be a viable option for investors who want to benefit from the current state of the market.

Those who spoke to Financial Vanguard, said rather than holding on to the stocks, investors could lend them for profit.
The lending involves a temporal transfer of stock holding for a fee, from their holder (the lender) to another party (the borrower) with the borrower agreeing to return the stocks to the lender either on demand or at the end of the agreed loan term.

Speaking to Financial Vanguard on this opportunity, Mr. David Adonri, Managing Director/CEO, Highcap Securities, stated: “Securities lending is something investors can look at now because the market is not going to be profitable for some time. So, for anybody that has high volume of securities, instead of keeping them without yielding any return, the person can lend them to those that want to borrow for interest.

READ ALSO:Investment experts give options for investors amidst COVID-19

This is the best time for people to offer their stocks for securities lending.
“This is important because if they leave the security in their portfolio, it will be idle and it will not be yielding anything because the securities market is not buoyant now.”

Also speaking, Mallam Garba Kurfi, Managing Director/CEO, APT Securities and Fund, said that the initiative would be beneficial for investors that invest for long term.

He said: “For institutions that lend securities, this is the best time to lend, but for the borrowers, this is the worst period to borrow stocks because prices are low.

“However, if the borrower believes that the market would fall further because of economic recession, which can bring prices down; they can go ahead and borrow.”

Meanwhile, Securities Lending Report by the Nigerian Stock Exchange, NSE, shows that the value of securities lending transactions stood at N34.76 million as at the week ended April 17, 2020, while the volume lent during the period stood at 4.14 million units.
Breakdown shows that MTN Nigeria Communication Plc has an outstanding 2.55 million units for lent; Nigerian Breweries Plc has an outstanding 318,000, while Presco and United Bank for Africa have 4.02 million units and 2.60 million units respectively.
Others are Union Bank of Nigeria (450,000 units), Zenith Bank (1.66 million units), Okomu Oil Plc (2.19 million units), GTBank (8.58 million units), Dangote Cement (1.74 million units), Dangote Sugar Refinery (2.35 million units), Flour Mills of Nigeria Plc (600,000 units) and Chemical and Allied Products Plc (50,000 units).

The post MARKET DECLINE: Stock dealers make case for security lending appeared first on Vanguard News.


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