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Investors abandon equities for bonds

By on March 29, 2011

Investors have continued to seek safe haven in bonds over equities, as trading activities at the bond market now increases on a weekly basis.

Available data at the Nigerian Stock Exchange (NSE) showed that a turnover of 204.56 million units worth N187.204 billion was recorded last week at the bond market, 20.35 per cent higher than the 169.96 million units valued at N155.711 billion exchanged during the previous week.

A fortnight ago, the bond market also increased by 6.34 per cent in turnover while activities at the stock market declined by 42.1 per cent.

Analysts say the bond market is enjoying better patronage from investors because bonds are secured products of the Exchange with guaranteed income and capital reimbursement, while equities are not and are more volatile in nature.

Bola Oke, a finance analyst at WealthZone, an investment management firm, said although equities have higher returns, “their volatility drove investors to the bond market which offers guaranteed returns.”

She said most of the activities at the bond market involve transactions of institutional investors and fund managers. “Hardly will you see retail investors in the bond market because investment there requires huge fund,” Ms. Oke said.

Ikazoboh’s advice

Emmanuel Ikazoboh, the interim administrator of the NSE, had advised market operators to invest in fixed income securities to lower their risk exposure in the capital market.

“Awareness is gradually rising regarding investments in bond as many state governments and corporate entities have applied to raise funds on the market via bonds. It must be noted that investment in bonds guarantees a fixed income. Until the late eighties, the bulk of investment through the Exchange was in debt securities, before equity investments took the centre stage,” Mr. Ikazoboh had said.

Measuring by turnover volume, the most active bond was the 4 per cent Federal Government of Nigeria (FGN) Bond April 2015 (7th FGN Bond 2015 Series 2) with a traded volume of 46.43 million units valued at N35.441 billion.

It was followed by the 10 per cent FGN July 2030 (7th FGN Bond 2030 Series 3) with a traded volume of 38.2 million units valued at N29.890 billion.

Of the available 33 FGN Bonds, only 24 were traded during last week, compared to the 13 recorded in the preceding week.

Stocks down

Meanwhile, investors at the stock market yesterday recorded more losses on the value of their equities, as market closed trading on negative note.

The NSE market capitalisation of the 194 First-Tier equities closed on Monday at N7.872 trillion after opening the day at N7.943 trillion, reflecting 0.89 per cent decline or N71 billion losses. The market has lost over N205 billion in the last three trading days.

The All-Share Index also declined after Monday’s trading by 0.89 per cent or 223.64 units to close at 24,639.74 basis points from 24,863.38.

Source : 234next