Domestic investors dominate equities market as foreign portfolios exit
By Kayode Tokede
Domestic investors continued to dominate the Nigerian Exchange Limited (NGX) equities market position as foreign portfolios investors exit amidst inflation rate, among other economy factors.
The stock market has marinated an uptrend in the last quarter of the year amidst the third-quarter earnings season.
Speaking to the figures, analysts said domestic institutional investors recorded the highest transactions, followed by retail investors; while foreign portfolio investors’ contribution remained the least with a larger increase in outflows.
It was noted that the ratio of total domestic transactions to total foreign transactions tilted lower to 79:21 in the month under review, from 72:28 in August 2021. Total domestic transactions increased by 46.43per cent while total foreign portfolio transactions moderated by 3.98per cent – amid sustained sell-offs, analysts said.
Specifically, total transactions on the NGX increased to N118.15 billion in September 2021 from N89.42 billion printed in August 2021; of which total domestic transactions rose month-on-month to N93.80 billion from N64.06 billion.
The FPI transactions declined to N24.35 billion in September from N25.36 billion printed in August, the report shows.
A further breakdown of the FPI transactions in September 2021 showed that foreign portfolio inflows increased slightly to N11.93 billion (from 10.72 billion); also, foreign portfolio outflows mellowed to N12.42 billion in September from N14.64 billion in July.
On the part of local investors, analysts at Cowry Asset saw an increased stake in the equities market – their purchase transactions was N47.17 billion, higher than N46.63 billion worth of outflows.
Further breakdown showed that retail inflow transactions were N14.52 billion, falling behind N17.24 billion outflows in the period. The domestic institutional investors’ inflow transactions were N32.65 billion, higher than the N29.39 billion worth of outflows from them.
Amidst dollar scarcity due to foreign investors’ weak sentiment on the Nigerian financial markets, local investors have deepened footprint as equity market transaction increased strongly in September 2021.
A fresh report released by the Nigerian Exchange on domestic and foreign portfolio participation in equities trading turned to be better than expected. In the period, total equities market transactions increased significantly in September 2021 compared to the volume of transactions executed in August 2021, the report showed.
In its macroeconomic note, Cowry Asset said the jump in total transaction value was chiefly driven by domestic institutional investors as they moved to participate in the interim dividends declared by some companies.
Analysts at the firm pointed, especially, to the Tier-1 banks which declared half-year dividends.
“Local investors appeared to have taken a position in some fundamentally sound stocks ahead of the release of corporates’ 9 months financial results – which Cowry Research feels would largely be positive.”
Retail investors’ participation was relatively quiet compared to the level of transactions printed in August, a suspicion analysts put forward was that retail investors want the financial results of companies released before they take further action.
However, foreign portfolio investors further moved out of the local equities market following recorded net outflows in the month of September.
Notably, analysts said domestic institutional investors’ gradual movement into the equities market to pick up the sold shares at cheaper prices was partly stimulated by the downward trend in money market rates within the just ended quarter (Q3 2021).
