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Foreign investors withdraw N483bn from stock market

By BusinessNews Staff on October 18, 2014

Foreign portfolio investment outflow from the Nigerian Stock Exchange amounted to N482.91bn in the first eight months of the year, data obtained from the Exchange showed.

According to the Exchange, the FPI outflows include sales transactions or liquidation of portfolio investments through the stock market.

The N482.91bn withdrawn by the foreign investors between January and August represented a 35.4 per cent increase on the N356.64bn FPI outflow reported for the same period of 2013.

The rise in the outflows comes on the back of a 0.4 per cent year-on-year drop in FPI inflow.

According to the data, foreign portfolio investors staked N389.06bn on equities on the NSE between January and August, compared to the N390.59bn they spent on equities in the corresponding period of last year.

The development was a marked departure from the situation in 2013 when the FPI inflow exceeded outflow. As of August 2014, the FPI outflow accounted for 55.4 per cent of the N871.97bn total foreign transactions, while the FPI inflow represented 44.6 per cent of total inflow.

Economists and analysts told our correspondent that the increase in FPI outflow and decrease in inflow could be attributed to concerns over developments in the global and domestic economies, especially the build up to the general elections in the country.

The Chief Executive Officer, Financial Derivatives Company, Mr. Bismarck Rewane, explained that preparations for the elections and the declining oil prices were likely factors for the rise in FPI outflow.

He said, “Last year, the market gained over 40 per cent; this year, the market has lost about four or five per cent. So, investors that came in last year made gains; but this year, the market has been very soft.

“Secondly, this is a year before the elections. Thirdly, the price of oil, which is the underlying strength of the economy, is declining. So, if you are an international investor, you will take a position; you will be more tentative in what you are doing.”

Rewane, who stressed that the development was not a sign of loss of confidence in the country, however, said if people were worried that things might not be great, they had a right to reduce their investment in a country.

He also dismissed suggestions that the recent case of the Ebola Virus Disease in the country impacted the market, saying, “Ebola was a Lagos/Port Harcourt issue; there were fundamental valuation issues before that.”

He added that the increase in FPI outflow was not a cause for panic.

According to Rewane, the development is just a cause for adjustment.

“This is not limited to Nigeria; it is happening across the major markets. The emerging market investors, who were bringing money here, are now beginning to get better options, because the United Kingdom is about to increase interest rates. People are getting more conservative with their investments,” he added.

The Chief Executive Officer, Trust Yield Securities Limited, Mr. Ola Yussuf, said there were several reasons for the development.

He said, “Foreign investors bring in their money when they feel comfortable with us and they take the money out when they need their money or are uncomfortable with us.

“So, if they feel that because of the coming elections there is uncertainty about Nigeria, some of them may take their money out.”

Yussuf also admitted that if the investment conditions in the countries from where the FPI inflows were coming from were better, foreign investors might be less adventurous.

He, however, said the build up to the 2015 general elections could be the major factors for the declining interest of portfolio investors in the Nigerian capital market.

Despite the drop in FPI inflows, foreign investors still dominate the equities market in terms of participation, accounting for 57.41 per cent of total equity transactions on the NSE between January and August.

[Punch]

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