Down But Not Out For The Count

摘要

If you want to stop stock market prices from falling, why not just intervene? That's what the Nigerian Stock Exchange tried to do last June as selling pressure mounted. The politically connected elite had been on a margin lending-induced splurge on the exchange, putting some banks at risk. For a week, traders were not allowed to post a buy order if the price was lower than the last recorded sales price. When volumes evaporated, authorities relented and allowed prices to fall by 1% a day. A cap was also put on the upside, at 5% per day. The consequence for the continent's third largest exchange was still a big drop in volumes. An investor who believed a stock was worth 20% less than the last recorded selling price simply waited 20 days to sell. Volumes fell from $100m per day to just $10m. However, the measure had some effect. In October, when some African exchanges lost a third of their value, the Nigerian exchange fell just 17%. From November, however, the authorities relented and allowed stocks to fall 5% per day, so market prices more closely match reality.