Foreign ‘big buyers’ pull N302.82bn out of stock market in 4 months

Foreign portfolio investors (FPI), the biggest buyers of Nigerian equities, in their search for attractive returns on investment (RoI) pulled out N302.82 billion from the bourse in the first four months of this year.

The foreign big buyers’ action, which had spiked a bear-run in Nigeria’s equities market and caused a negative return on investment, resulted from equities sales transactions or liquidation of portfolio investments.

Equities monthly transactions show that foreign portfolio investors invested N39.53 billion in January, but sold and liquidated investments worth N50.14 billion. In February, these investors staked N32.75 billion, but ended up pulling N103.53 billion out of the stock market.

Also, they invested N55.13 billion in March but sold and liquidated stocks worth N75.42 billion; while in April, N65.06 billion came through foreign investors into the equities market, but they later pulled out N73.73 billion from the stock market.

Despite this development, financial and market analysts say foreign exposures to Nigerian equities are still driven by the attractive valuations carried by Nigerian equities.

“The increased foreign exposure in Nigerian equities was induced by waning interest in fixed income markets due to a decline in yields. This elicited investment switch to equities which offered attractive valuations,” said Sewa Wusu, market analyst at Sterling Capital.

“Most foreign portfolio investors weigh options of attractive returns. Thus the contraction of yields in the fixed income segments continued to drive their portfolio rebalancing tilted towards the equities markets,” he said.  

Also, Femi Ademola, head, research and intelligence, BGL plc, said the “driver of foreign exposure in Nigerian equities is bargain hunting”, adding that “some of Nigeria’s equities are selling at very attractive valuations”.

Investment flows through foreign portfolio investors at the nation’s bourse grew to N138.78 billion (about $0.89 billion) in April 2014, up 54.8 percent from January 2014.

Out of N731.94 billion worth of equities transactions, domestic investors ceded over 50 percent of trading to foreign investors, as domestic transactions decreased significantly from 50.72 percent to 24.75 percent over the same period.

In the review four-month period to April 2014, foreign investors’ cumulative stake in Nigerian equities rose to N192.47 billion, representing 67.67 percent of the total value of deals done in the said period.  

Recent data from the broker dealer regulations department of the Nigerian Stock Exchange (NSE) show that total equities transactions increased by 1.35 percent from N181.97 billion in January to N184.43 billion in April, and foreign portfolio investors’ inflows accounted for 75.25 percent of total transactions.

“In comparison to the same period in 2013, there was an increase in total FPI by 12.86 percent, whilst the total domestic transactions reduced by 32.61 percent. However, the FPI outflows outpaced inflows which were the reverse when compared to the same period in 2013,” the NSE stated.

“Overall, there was a 3.29 percent decrease in total transactions, in comparison to the same period in 2013,” it said.

Iheanyi Nwachukwu