Low valuation of stocks to attract funds to equities market — Analysts
By Kayode Tokede
A group of analysts at CSL Research, have said that low valuations of some highly rated stocks may attract some funds into the equities market of the Nigerian Stock Exchange (NSE).
CSL Research in its latest report expressed that there is a renewed optimism for the economic outlook following the continued rise in brent crude price.
According to them, “This position was further affirmed by Fitch’s recent report which gives Nigeria a ‘B’ rating with stable outlook. This rating if accompanied with better foreign exchange management makes for improved Foreign Portfolio Inflow.
“While we may agree that it heralds more foreign portfolio inflow, the more likely destination will be the fixed income space.”
Analysts at CSL Research were reacting to the NSE released February 2021 Domestic and Foreign Portfolio Investment (DFPI) report.
Expectedly, the market in February recorded a dip in total transaction value from N232.5billion in January to N215.6billion in February 2021.
The February 2021 performance was a marked improvement (45.17 per cent) over the N148.5billion reported for the corresponding period in 2020.
According to them, “The report showed improved participation by Foreign Portfolio Investors, evidenced by the rise from 20.44 per cent to 28.79per cent in their share of total trade carried out on the bourse between the first two months of 2021. Also, domestic participation reduced from 79.56 per cent in January to 71.21 per cent in February.”
They added that, “The total transactions on the local bourse continues to reflect the overall pulse of the market which has been largely bearish for the larger proportion of the last two months.
“We expect activities in the market to remain subdued in the short term given the recent rise in rates in the Fixed Income Market.
“This can already be observed in the portfolio re-alignment of Institutional Investors between January and February as their holding in the market reduced by 17.84 per cent to N99.7billion from N117.5billion.
“The percentage of equities to Asset Under Management (AUM) of Pension Fund Administrators in the bourse improved greatly towards the tail end of last year, moving from 5.37 per cent in June 2020 to 7.73 per cent in December.”
