Retail investors in Nigerian equities are reducing their exposure significantly, refusing to take advantage of cheap stocks.
In the recently released NSE foreign portfolio investment report of June 2019, retail investors sold off stocks worth N78.33 billion against an inflow of N23.41.
This puts net flow during the period at a deficit of N54.92 billion in June worsening from a deficit of N41 million in the previous month.
Analysis of retail investors’ activities in the last 6 months revealed that net flows declined by more than half in May 2019 from N9.49 billion to N3.48 billion in April.
This trend continued till net flows plunged into a deficit of N41 million in May 2019.
Analysis revealed that while in the last 6 months retail total inflow transactions have increased at an average of 5 percent, outflow transactions outpaced inflow by 47 percent as June recorded the biggest outflow during the period.
In contrast to trend witnessed in the retail space of the Nigerian equity market, institutional investors on the other hand have seen net flows improve in the last 2 months as they slowed down exit from the current bearish market in June while taking caution on exposure into the market.
In June 2019, institutional outflow transactions during the period slowed significantly by 60 percent to N18.24 billion against N46.05 billion in May, while inflow improved slightly by N1 million to N50.59 billion.
This puts net flow during the period to a surplus of N32.35 billion in June, a further improvement from a surplus of N4.53 billion in the previous month.
While in the last 6 months outflow transactions of institutional investors have accelerated at an average of 10 percent against 47 percent in retail transactions, inflows have paced faster during the period at an average of 29 percent against 5 percent in retail transactions.
The NSE witnessed a surge in institution inflows by 189 percent in May thanks to the listing by introduction of MTN Nigeria which saw the ASI index on a 6 trading day rise in market value.
The last 3 months have seen retail investors’ pessimism worsen neglecting opportunities in bellwether stocks whose stock prices have neared their 1-year low levels.
This saw outflow in the last 3 months accelerate significantly by 142 percent on the average against a decline by -15 percent in institutional outflow transactions. Also retail inflow transaction underperformed grossly at 22 percent in the last 3 months compared to an average of 70 percent growth in institutional inflow transactions.
In addition, as at June, total transactions at the nation’s bourse increased by 34.42 percent from N221.13 billion (about $713.7 million) in May 2019 to N297.25 billion (about $970.1 million) in June 2019.
The performance of the current month when compared to the performance in the same period (June 2018) of the prior year revealed that total transactions also increased by 58.29 percent. In June 2019, the total value of transactions executed by domestic investors significantly outperformed transactions executed by foreign investors by 34 percent.
DAVID IBIDAPO
