Total transactions by domestic portfolio investors in the stock market amounted to N1.045 trillion in the first nine month of the year.
The domestic investors have continued to hold ground on the floor of the Nigerian Exchange (NGX) Limited despite rising inflation and currency volatility in the foreign exchange market as they were major drivers of the Domestic & Foreign Portfolio Investment.
This was contained in the Domestic and Foreign Portfolio Investment (FPI) April 2022 report. The Domestic and Foreign Portfolio Investment Report is prepared on a monthly basis by NGX Regulation Limited, with trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI) flows. These transactions are carried out by Domestic and Foreign investors.
According to the Domestic and Foreign Portfolio Report of the Nigerian Exchange (NGX), total transactions in the domestic equities market increased by 47.86 per cent year-to-date growth as at September 30, 2022.
Total transactions at the nation’s bourse from January to September 2022 stood at N1.969 trillion as against N 1.332 trillion in the corresponding period of 2021. Foreign transactions stood at N321.04 billion, accounting for about 16.30 per cent of the total transactions carried out, while domestic transactions constituted N1.045 trillion, representing 83.70 per cent of the total transaction, outperforming the foreign investment during the same period.
Analysis of domestic transactions showed that institutional investors outperformed retail investors by 51.05 per cent. A comparison of domestic transactions in the period under review revealed that retail transactions pulled N556.78 billion investment, while institutional investors’ investment amounted to N1.091 trillion from January to September, 2022.
% m/m to NGN123.97 billion in August (July: NGN101.18 billion). Still, the print is significantly below the average monthly gross transactions (NGN235.88 billion) so far in 2022, reflecting the troika impact of (1) higher yields in the fixed income market, (2) lingering FX liquidity constraints, and (3) a lack of flexibility in the FX framework. For the review month, we highlight that the domestic transactions (77.2% of gross transactions) increased by 33.9 per cent m/m to NGN95.76 billion while foreign transactions (22.8% of gross transactions) fell by 5.0 per cent m/m to NGN28.21 billion. Notably, domestic investors were net sellers of equities since the MPC of the CBN started increasing the MPR, safe for July.
In the short to medium term, we expect domestic investors to continue to dominate market performance, although rising FI yields may constrain buying activities. Also, FPIs who have exhibited a lackluster interest in domestic equities are likely to remain on the sidelines due to sustained FX liquidity challenges and interest rate hikes by central banks in developed countries.
Capital market analysts stated that local investors are taking advantage of the incredibly low prices of stocks in the NGX to increase their investments.
They explained that local investors are increasingly their stake in equities market due to the attractive dividend yield in the market coupled with low yield environment in the fixed income market. They observed that the development is good for the local bourse, saying that it would restore credibility and stability to the market, which was hitherto marred by volatility occasioned by the activities of foreign investors.
Cordros Securities Limited noted that “domestic investors were net sellers of equities since the MPC of the CBN started increasing the MPR, safe for July. In the short to medium term, we expect domestic investors to continue to dominate market performance, although rising FI yields may constrain buying activities.
“Also, FPIs who have exhibited a lackluster interest in domestic equities are likely to remain on the sidelines due to sustained FX liquidity challenges and interest rate hikes by central banks in developed countries.”
Cowry Asset Management Limited said that “the appetite of foreign portfolio investors (FPIs) continues to decline amid sustained fear of foreign exchange volatility eroding their returns on investment and insecurity currently being encountered in the country.
The chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion said that “It is a good thing that domestic interest is building in the market; it is really positive. This is what we have been clamouring for, where the local investors will be the drivers of the market. What we, typically, see is that domestic investors follow the investment pattern of the foreign investors whereby if we see that they are buying, we will buy and if we find out they are selling, we will sell.”
