As global markets continue to grapple with the impact of plunging oil price and COVID-19 spread, data from the Nigerian Stock Exchange (NSE) on domestic and foreign investor participation for March 2020 showed an intensified sell-off by foreign investors on the back of elevated global risk aversion for emerging markets and frontier markets assets.
The sell off by foreign investors also saw share prices of major bellwethers shares such as MTN, Nestle to historic lows, providing an attractive entry point. It also saw a broadly bearish trend as the NSE All Share Index shed 19percent.
Foreign inflows grew 18.5percent month- onmonth to N22.5bn, while foreign outflows grew at a faster pace, up 67.5percent monthon-month to N87.7bn.
Consequently, net outflows spiked from N33.4bn in February to N65.2bn in March, the highest since May 2018.
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Further analysis of the data showed that the total transactions at the nation’s bourse for the month of March increased by 63.58 percent from N148.50billion in February 2020 to N242.91billion in March 2020, when compared to the performance in March 2019 ( N110.11billion) revealed that total transactions increased by 120.60percdnt.
In March, the total value of transactions executed by domestic Investors outperformed transactions executed by Foreign Investors by 10percent
Total transactions executed between the current and prior month ( February 2020) revealed that total domestic transactions increased by 71.97percent from N77.16 billion in February to N132.69 billion in March 2020.
Also, total foreign transactions increased by 54.50percent from N71.34 billion to N110.22 billion between
February and March 2020.
The value of domestic transactions executed by Institutional Investors outperformed retail Investors by 10percent. A comparison of domestic transactions in the current and prior month (February 2020) revealed that retail transactions increased significantly by 103.72percent from N29.56 billion in February 2020 to N60.22 billion in March 2020.
Similarly, the institutional composition of the domestic market increased by 52.23percent from N47.60 billion in February 2020 to N72.46 billion in March 2020.
According to analysts report at CSL Stockbrokers, the surge in net inflows from domestic investors in the month was purely driven by cheap valuations amidst elevated system liquidity driven by maturities from OMO bills and low yields on fixed income securities.
“In the short to medium term, we expect this trend from domestic investors to persist, given the dislocation in the fixed income markets due to the heterodox policies adopted by the CBN. On the other hand, although we began to see increased level of foreign investor participation in April, we believe this was driven by the inability of many foreign investors to get dollars for repatriation, forcing some to reinvest their funds,” the report said.
“We generally expect foreign investors’ interest to remain weak, owing to increased macroeconomic fragilities concerns on stability of the currency, amidst heightened uncertainties on the regulatory landscape in the banking sector,” the report added.
