Foreigners rake in N440bn from stock investment in 10yrs

Foreign portfolio investors who took long term position in Nigeria’s equities market made about N439.48 billion gain since 2014.

These portfolio investors did transaction worth over N9trillion in ten year and 10 months period according to trading data at the Nigerian Exchange Limited (NGX).

These investors who inflowed N4.354trillion into Nigeria’s stocks from 2014 to October 2024 outflowed N4.794trillion in same period, according to Foreign Portfolio Investment (FPI) data tracked by BusinessDay.

Ahead of the release of November foreign portfolio investment data, analysts anticipate sustained interest in attractively priced stocks as investors seek to maximise capital gains opportunities ahead of year end and portfolio managers realign their portfolios to position for a new year.

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“The MPC’s ongoing tightening efforts to curb inflation and stabilise the FX market carry varying implications for the financial markets. Fixed-income yields are expected to remain elevated, with the latest rate hike likely having a more muted impact on treasury yields. “Despite these policy adjustments, a significant capital shift from the equities market is unlikely, as investor sentiment is expected to remain guided by fundamentals,” Meristem research analysts said in their November 27 post-MPC note.

The Monetary Policy Committee (MPC) recently voted unanimously to raise the policy rate on the back of renewed inflationary pressures, as inflation continues to constrain purchasing power and negatively affect the welfare of citizens. The Monetary Policy Rate (MPR) was hiked by +25 basis points (bps) to 27.50 percent from 27.25 percent.

The MPC noted the improvement in the external sector reflected by the increase in the current account surplus, enhanced remittances, and capital inflows that have impacted external reserves positively.

“This suggests that key policy measures on the part of both fiscal and monetary authorities are yielding their desired outcomes,” Coronation research analysts said in their November 26 note.

In the review period, foreign inflow into stocks peaked in 2017 to N772.25billion while it slowed most in 2023 to N174.8billion. Further check shows that foreign outflow was most in 2014 when it reached N846.53billion but it slowed the most in 2022 to N183.47billion.

In 2014, foreign investors inflowed N692.39billion into Nigeria stocks but outflowed N846.53 billion the same year. As at October 2024, foreign inflow into Nigeria stocks was N344.3billion while foreign outflow was N400.04billion.

In 2023, foreign investors brough in N174.8billion into the stock market and took away N235.82billion. In 2022, they brought into the market about N195.76billion and took away N183.47billion from the market. In 2021, about N204.88billion were inflowed into Nigeria’s equities while N229.62billion were outflowed.

Despite CBN’s consistent rate hikes decisions, increased buy interest in Nigeria’s stocks pushed the market return this year to 32.90 percent, according to trading data as at Friday December 13.

“The broad market’s positive momentum is expected to persist, supported by an improved market breath, which expanded significantly by +47.88 percent week-on-week (WoW) to 2.38x (compared to 1.61x the preceding day week), as short-term bargain hunting and Santa-Claus rally continues.

“However, we acknowledge the possibility for profit taking activities by investors on tickers that have recorded gains in recent weeks. Overall, we project the market to maintain its bullish momentum this week,” according to Lagos-based Meristem research analysts in their December 16 note.

In 2020, foreign inflow into Nigeria equities was valued at N247.27billion while foreign outflow was N 481.93billion. In 2019, Nigeria equities market saw N419.13billion of foreign inflow while in same period, these investors moved out N523.42billion from the market.

Samuel Oyekanmi, senior research analyst Norrenberger said that the decline in inflows 2020-2023 was due to issues with exchange rate and we saw capital inflows into the stock market.

“ But since Cardoso, they’ve been able to pay the backlog and since then we saw inflows in Q1 and Q2 of 2024, however it declined in the third quarter due to the market’s poor performance,” Oyekanmi said.

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In 2018, foreign inflow into stocks was N576.45billion while foreign outflow from stocks was N642.65billion. In 2017, stock market saw N772.25billion investment by foreigners while they took away only N435.31billion.

In 2016, these investors brough in N256.52billion into stock market and moved out about N261.03billion from the market while in 2015, equities market saw N470.83billion inflowed by foreigner investors while N554.24billion was outflowed from the market by these portfolio investors.

“Looking forward, the equities market is expected to retain its buy interest as investors cherry-pick undervalued stocks. However, given the high interest rates in the fixed income and money markets, we expect some bearish undertone to persist in the equities market as fixed income biased investors take advantage of the high yields in the fixed income space,” said Lagos-based research analysts at United Capital.

They however said the bulls will remain incentivised “to persist in bargain hunting, given the tremendous mid-long-term opportunities in the equities market. Fund managers and businesses may entertain mid-long-term (≥3 months) investment objectives, cherry-picking only sound equities with strong fundamentals and ongoing/pending corporate actions. This strategy will maximise market opportunities, thereby optimising portfolio returns”.