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Domestic investors record N109.75bn transactions in May

By on June 30, 2014

There are indications that local investors in the Nigerian capital market may have started to find their way back to the bourse as data from the Nigerian Stock Exchange for the month of May showed that domestic investors were able to stake a total of N109.75 billion (about $0.71 billion), an increase of 18.9 per cent from N92.30 recorded in January.

On a monthly basis, the Nigerian Stock Exchange polls trading figures from major custodians and market operators on their foreign portfolio investments (FPI).

The figures for the month of May (which is the latest) showed that FPI ceded about 8.88 per cent of trading to domestic investors as foreign transactions decreased marginally from 49.28 per cent to 45.56 per cent over the same period.

According to the NSE, total transactions increased by 10.79 per cent from N181.97 billion in January to N201.61 billion in May and foreign portfolio investors’ inflows accounted for 20.47 per cent of total transactions while the outflows accounted for 25.09 per cent of the total transactions.

The NSE report also showed that while the total foreign inflow for the month of January stood at N39.53billion, the figure rose to N41.27 billion in May.
On the other hand, the total foreign outflow moved from N50.14billion in January to N50.59 billion in May.

In comparison to the same period of 2013, there was no change in total FPI, while the total domestic transactions increased by 13.32 per cent.

The exchange said FPI outflows outpaced inflows which were the same when compared to the same period in 2013. Overall, there was a 6.84 per cent increase in total transactions in comparison to the same period in 2013.

“Total FPI transactions of N616 billion which accounted for 14.8 per cent of total transactions in 2007 consistently increased over the years to N1,042 billion, representing 50.8 per cent of the total in 2013 (an increase of 36 per cent over the six year period).

“Domestic transactions on the other hand started at N3.556 trillion representing 85.2 per cent in 2007 but reduced significantly to N1.009 trillion, representing 49.2 per cent of total transactions in 2013 ( a sharp decline of 36 per cent in the six year period),” the report stated.

Explaining the rising appetite of Nigerian investors, Head Research and Intelligence, BGL Plc, Mr. Olufemi Ademola, said a couple of corporate actions that took place in the month of May was responsible for the development.

“What I noticed in the month of May was that there was a kind of push in the market and the key thing that I remembered to have happened at the period was the listing of Forte Oil shares and ETI Morgan Stanley Corporate Composite Index.

“For Forte Oil, the price started flying and it succeeded in dragging other stocks along. You will notice that at the time Forte Oil was growing, Con Oil was growing too. What happens is that at a period like this, other investors will also like to benefit from the situation and that is why you will have greater participation of domestic investors. During that period too, there were some corporate actions which attracted greater participation of domestic investors.

“We also saw some activities in Lafarge. This development started making the market attractive and the yield started going higher and people started investing. What you will notice is that when the market is growing, many Nigerians will like to come and invest but they will run away anytime it is not doing well. So once they see some kind of uptake, then they will rush. It is like a push and pull scenarios in the market.

“So, it is the activities in Forte Oil and ETI that drove prices in May apart from dividend payment. Market actually relies on information,” Ademola said.

Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said the rising enthusiasm of domestic investors to equities could either be a reflection of increased confidence in the market or the gradual exit of foreign investors.

He said , the improvement noticed in the May figures may be due to improved confidence in the market, saying however that the question to ask is how much of it are made up of speculative activities.

He noted that generally, investors are increasing their appetite, adding that instruments in the market have increased. Another factor identified was the new guideline from  the National Pension Commission (PENCOM) which allows additional room, saying if you assume that N4.3 trillion of pension assets are available you can imagine the enthusiasm.

However, Rewane, who acknowledged that international investors were reducing the amount of funding coming to the market, was quick to blame the pressure on the naira for their loss of enthusiasm.
“Don’t forget that the currency has come under some pressure. So, international investors are looking at the rate of returns in line with prevailing exchange rate,” he said.

 

[This Day]