Following the upward rate trajectory by the Central Bank of Nigeria, foreign investors’ participation and control has remained at a minimal 25 per cent of the market, dealers from Cowry Assets Management have said.
Foreign participation in total equity transactions have steadily been on a decline over the years on the back of the lack of incentive to trigger sentiments as the election year also draws nearer.
“But we reckon that local institutional investors may have more incentive to remain in the market despite the rate hike while the risk averse investors will continue to exhibit apathy towards risk assets in the face of the rate hike,” the dealers stated in a note to clients.
Meanwhile, amid the mixed trail of investor activities and rate of volatility witnessed in the local equities market in a wobbly year, strong appetite of domestic investors has continued to outperform the sentiments of foreign investors as obviously seen in their total transaction numbers.
This was hinged on the fact that domestic investors since the start of 2022, began taking a bet on the domestic bourse. However, since the start of the second half of the year, the general market activity has been in a lull due to risk-off sentiment ahead of the 2023 general elections and a lacklustre macroeconomic environment.
In the local bourse, total Foreign Portfolio Investment (FPI) transactions rose to N2.08 trillion in 10 months (Oct. ‘22) and up 34.6 per cent year-on-year from N1.54 trillion in the same period of 2021, signalling an upbeat in investor activities in portfolio investment through equities trading.
Thus, analyses of the trading data polled from the NGX showed that year-to-date, domestic investors accounted for the bulk of transactions which printed N1.73 trillion with a share of 83 per cent, while foreign investors’ participation remained low at 17 per cent (N350 billion).
ALSO READ FROM NIGERIAN TRIBUNE
Since the capital flight triggered by the pandemic, foreign participation is yet to attain pre-pandemic levels. This is due in part to legacy issues of foreign exchange (FX) liquidity amid the fragile macroeconomic landscape.
Thus, the performance highlights of transaction trend point that foreign portfolio investors activities have continued to dwindle since the N1.22 trillion reported in 2018 to N435 billion in 2021.
In the month of October, total FPI transaction value represented a year-on-year decline of around 48 per cent. This can be attributed to the risk-off sentiment which pervaded the bourse since the close of June.
According to the dealers, a closer look reveals that foreign investors’ interests accounted for 26 per cent while domestic investors were responsible for 74 per cent of total transactions at the exchange which rose 34.42 per cent from N81.90 billion in September 2022 to N110.09 billion in October 2022.
Furthermore, the report from the NGX highlighted that activities of institutional investors were higher than that of retail investors by a difference of 42 per cent as institutional composition of the domestic market surged 105 per cent to N57.5 billion in October from N28.05 billion in the prior month.
Meanwhile, a sharp comparison between the current and previous months showed that domestic transaction in the current and prior month (September 2022) revealed that retail transactions decreased by 29.64 per cent from N34.18 billion in September to N24.05 billion in October 2022.
and then