• Wednesday, July 24, 2024
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Foreigners raise equities bet as 4-month deal hits N334bn

Nigeria’s rate hike further hurts stocks

Nigeria’s stock investors exchanged equities worth N1.894trillion in four months to April 30, 2024 as against N721.44 billion recorded same period in 2023.

Foreigners accounted for 17.63 percent (N334.01billion) of the total equities transactions in the four months period while domestic investors accounted for 82.37percent (N1.560trillion), according to April trading data on domestic and foreign portfolio participation in equity trading.

Foreigners in Nigeria’s equities market had in four months to April 2023 traded stocks worth only N62.18billion or 8.62percent while domestic investor traded N659.26billion or 91.38percent in four months to April 2023.
Foreign investors trade in stocks peaked in April, representing 34.90percent of the total value of stocks traded. The record value of stocks traded by foreigner investors in April was N120.83billion, while domestic investors accounted for equities deal worth N225.40billion or 65.10percent.

Nigeria’s stock market’s return in 2024 stood positive at 33.64 percent in the trading week to June 14 following increased buy activities in oil & gas, banking and insurance stocks.

“We expect a continued interest in fundamentally sound stocks,” said analysts at Comercio Partners in their June 14 note.

Read also: Fixed income market seen taking shine off equities

Despite foreign investors interest in Nigerian stocks in the four months to April 2024, the market remains under pressure as investors pursue safety in the fixed income (FI) space amid attractive yield.

“The last 12 months, and particularly the past five months, have seen a transformation in Naira fixed-income yields. Not only are T-bill yields realised at the CBN’s auctions high, they are consistently high.

“The average yield of 91-day T-bills at auction so far this year has been 15percent, annualised, as opposed to an average of 5.2percent in 2023; the average yield for 1-year T-bill has been 23.3percent against an average of 13.3percent in 2023,” said Coronation research analysts in their June 10 note.

In March 2024, foreign investors traded stocks worth N94.26billion or 17.50percent, while domestic investors accounted for N444.28billion or 82.50percent.

In February, foreign stock investors traded equities worth N65.81billion or 18.39percent of the total value of trade while domestic investors traded N292.07billion worth of stocks or 81.61percent.

In January, it was N53.11billion or 8.15 percent by foreigner and N598.41billion or 91.85percent by domestic investors.

In four months to April 30, ten stockbroking firms accounted for equities deals worth N1.024trillion or 54.11 percent of the total value of stocks traded on the Nigerian Exchange Limited (NGX) in same period.

According to Broker Performance Report by the Nigerian Exchange Limited (NGX), ten stockbroking firms that traded this value of equities in the review four months period are: CardinalStone Securities Limited, Stanbic IBTC Stockbrokers Limited, United Capital Securities Limited, Apt Securities and Funds, EFG Hermes Nigeria Limited, Meristem Stockbrokers Limited, Cordros Securities Limited, Chapel Hill Denham Securities Limited, Apel Asset Limited, and Morgan Capital Securities Limited.

Despite attractive returns from the fixed-income market, participants continue to take positions in fundamentally sound stocks given their low prices.

“We expect activities in the fixed income market to continue to stand as a strong demotivator toward equities investments,” according to Lagos-based United Capital in their June 19 note.

They further said that a strong hope for the market is the expected high base effect for inflation in June 2024.

“Given the indications that equities market is considerably oversold, induced by the +750 basis points (bps) MPR hike year-to-date, we expect bargain-hunting in the equities market to remain unabated, particularly around fundamentally sound stocks (currently trading around their oversold region), and stocks with pending corporate actions,” United Capital analysts said.

Month-on-month (MoM), the peak of value of stocks traded over the review four months period was in January (N651.52billion). It was followed by March (N538.54billion), February (N357.88illion), and April (N346.23billion).

Foreign inflow in the four months period was N135.95billion, while foreign outflow was N198.06billion. Domestic retail investors traded N771.66billion stocks while domestic institutional investors accounted for N788.50billion in the review four-month period.

Meristem research analysts in their market outlook for the week commencing June 19 said they anticipate a mixed performance in the equities market, driven by continued positive momentum and cautious trading.

“Also, the sticky movement around the fixed-income yields might cause the fixed-income market to be less attractive, potentially driving inflows of funds into the equities market. Moreover, we anticipate that favourable entry points will sustain bargain-hunting activities in the equities market this week,” the analysts said.

“Conversely, we anticipate some level of profit-taking activities this week, as investors remain cautious about holding stocks for the long term. Ultimately, we expect the bulls to outweigh the bears, bringing the All-Share Index to close in the positive zone this week,” they added.

CardinalStone Securities Limited led the league of top ten brokers by value of trade after trading stocks worth N197.535billion or 10.43 percent of the total value of equities traded same period.

Read also: Equities market fails to sustain gain

Stanbic IBTC Stockbrokers Limited followed after accounting for equities deals worth N185.330billion or 9.79percent. United Capital Securities Limited came third on the list accounting for equities trade worth N126.715billion or 6.69 percent.

Other are: Apt Securities and Funds (N110.305billion or 5.82percent), EFG Hermes Nigeria Limited (N96.783billion or 5.11percent), Meristem Stockbrokers Limited (N73.650billion or 3.89 percent), and Cordros Securities Limited (N73.143billion or 3.86 percent).

Also, other top-ten stockbrokers by value of stocks they traded in the four months period under review are Chapel Hill Denham Securities Limited (N57.149billion or 3.02percent; Apel Asset Limited (N53.635billion or 2.83percent), and Morgan Capital Securities Limited (N50.605billion or 2.67percent).

The Nigerian Exchange Limited (NGX) recently disclosed the launch of a new Unstructured Supplementary Service Data (USSD) platform, an innovative idea that allows users to access real-time stock market information and direct connection with stockbrokers by dialling *5474# on their mobile phone.

“We believe this idea will help boost financial inclusion and participation in the Nigerian capital market,” according to Meristem research analysts.