Nigerian investors account for highest equity deals in 10yrs
In the first six months of 2021, local investors accounted for the biggest share of equity transactions on the Nigerian Exchange Group since 2011, as appetite from foreigners dropped.
Local investors, which include institutional and retail investors, accounted for 78.54 percent of equity transactions in the first six months of 2021 while foreign investors accounted for 21.46 percent, according to the Nigerian Exchange Limited (NGX) recently released Fact Sheet.
For foreign investors, it is also their lowest participation in Nigerian equities since 2011, as challenges around foreign exchange accessibility dampened their exposure.
With local investors dominating, it reduces the volatility that usually resulted from outflows of foreign funds from the market, but it also reduces the depth of the market, according to analysts interviewed by BusinessDay.
“The market can do with more investors, both local and foreign in order to further deepen the market,” a South Africa-based portfolio manager told BusinessDay.
Local investors have risen from when they played second fiddle to foreign investors to dominating the market since 2016.
In the first half of 2011, local investors accounted for only 33.2 percent of transactions on the NGX, while in the first half of 2012, it was 38.6 percent. In H1’2013, local investors accounted for 51.4 percent of the transactions, while they accounted for 37.1 percent and 47.1 percent in 2014 and 2015.
In 2016, however, local investors took the clear lead in dominating the market after accounting for 59.57 percent, 54.03 percent, 50.53 percent, 54.16 percent and 60.48 percent in 2016, 2017, 2018, 2019 and 2020, respectively.
“The new found dominance of the local investors is mainly down to the exit of foreign investors as well as increased participation of institutional investors in the stock market amid the low yield environment in Nigeria,” the head of research of a local pension fund told BusinessDay.
The total foreign transactions on Nigerian equities valued at N942.55 billion ($2.59bn) in 2019; N729.20 billion ($1.78bn) in 2020, was at a paltry N221.96 billion ($54m) in the first six months of 2021, signalling foreign outflows from Nigerian equities market.
The Nigerian Exchange closed the first half (H1) of 2021 in the red following the reallocation of assets from equities to fixed income (FI) as a result of the uptick in yields in the Fixed Income market during the period.
This reflected on the return posted by NGX All Share Index (ASI), which closed the second quarter (Q2) at 37,907.28 points, signifying a 5.87 percent decrease from 40,270.72 points at the start of the year. Nonetheless, all equity market indices, except the NGX ASEM index, posted positive one-year returns.
Total Market Capitalisation at N38.19 trillion ($92.81bn) in June 2021 represents a 52-week increase by 33.44 percent.
The cumulative value of Large Cap stocks stood at N15.88 trillion ($38.60bn) in H1’20, up 71.66 percent over a 52-week period.
The Mid Cap stocks’ value stood at N2.86 trillion ($6.96bn), up 11.98 percent, while Small Cap stocks value was N1.02 billion ($2.48bn), representing a 52-week high of 5.08 percent.
Nigerian equities were recently ranked by investment advisory firm, Financial Derivatives Company (FDC), as the best investment asset class among four other asset classes, to hedge against inflation from August 2020 to August 2021.
Vetiva analysts said half-year corporate earnings in the Tier-1 space is fuelling sentiments in the market and they expect investors to ride on this wave in the short-term, while still cautious of the broader market.
The Exchange has also raised its game in keeping investors (local and international) abreast with its trends, according to Jude Chiemeka, divisional head, Trading Business at NGX.
Chiemeka said a new product “X-Mobile” affirmed the NGX commitment to make financial services more inclusive and provide superior customer experience in the access and use of capital.
“We believe that X-Mobile is on course to become the primary interface for local and international investors to stay abreast of market trends and domestic economic performance,” Chiemeka said.
The NGX is a multi-asset exchange providing a home to the best of African enterprises listed on its Premium, Main, and Growth Boards; diverse fixed income securities; Exchange Traded Products (ETPs); Mutual and other investment funds.
NGX Fact Sheet shows that the Exchange Traded Fund (ETF) Market Capitalisation at N12.25 billion ($29.78m) as at the end of second half of 2021 implies 52-week decrease by 12.90 percent.
The Bonds Market Capitalisation at N17.39 trillion ($42.27bn) in Q2 2021 represents a 52-week increase by 17.90 percent. The NGX-30 Index at 1,594.87 points represents an increase by 51.59 percent over a 52-week period from July 2020.
In Q2 2021, trading activities decreased when compared with Q2 2020 as the total volume and value of securities traded reduced by 15.41 percent and 5.41 percent, respectively.
There was a 5.41 percent decrease in the average daily value traded, from N3.22 billion ($8.33m) in Q2 2020 to N3.05 billion ($7.40m) in the period under review.
Similarly, the average daily volume of securities traded fell by 15.41 percent to 245.97 million units in Q2 2021 when compared with 290.77 million units recorded in Q2 2020.
Oscar Onyema, CEO, NGX Group, had said at an investors conference that, “Investor participation is central to the growth and sustainable development of any economy.
“The Exchange is, therefore, committed to facilitating conversations that will expound on the retail investment opportunities available in the capital market and the channels through which they can be accessed.”