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FOREIGN INVESTMENTS INFLOW DOWN TO 16.10 BILLION NAIRA IN FEBRUARY… AS EQUITIES MARKET HALT RALLY

(Last Updated On: March 27, 2017)

by James, Michael Igiri

 

Investor’s apathy for investment in the stock exchange market has continued to rise as both foreign

and domestic investors’ participation on the Nigeria Stock Exchange, NSE, took a downward turn in

the month ended February 28, 2017.

Data polled by the NSE showed that total foreign investors’ transaction on the NSE slowed by

21.52% to 34.5 billion Naira from 44.01 billion Naira during this period.

According to reports,  domestic transactions decreased by 22.88% from 51.31 billion

naira recorded in January 2017 to 39.57 billion naira in February 2017. Foreign investment inflow

declined to 16.10 billion naira from 22.61 billion naira, representing 28.79% decrease, while total

foreign investment outflow decreased by 13.88% to 18.44 billion naira compared to 21.40 billion

naira outflow in the previous month in January 31, 2017.

Further analysis showed that the institutional composition of the domestic market decreased by

21.93% from 31.19 billion naira recorded in January to 24.35 billion naira in February 2017. The

retail composition also decreased by 24.35% from 20.12 billion naira to 15.22 billion naira within the

same period. This, according to the NSE, indicates more active participation by institutional investors

over their retail counterparts in the period under review.

Bearing his mind on some of these economic fundamentals, Managing Director/CEO Cowry Asset

Management Limited, Mr Johnson Chukwu, said the major constraint to investment in the country

remained lack of confidence exacerbated by disparity in foreign exchange market. He explained that

nothing has changed about the country’s economic fundamentals to encourage foreign investors to

come in.

“Foreign investors do not have so much confidence; there is lack of confidence on the Nigerian

economy as a whole by foreign direct, and portfolio investors. That is also not helped by the current

disparity in foreign exchange prices between official rate, interbank rate and the parallel market.

Added to the fact that access to liquidity in the FX market is such that investors are not assured that

they can just convert their naira asset back to dollar whenever they want, so market liquidity in FX

market is another constraining factor,” he said.

Meanwhile, the rally witnessed the previous week in the equities market was halted as investors lost

71.1 billion naira from their investment during the week. The market capitalisation, which started the

week at 8.878 trillion naira, fell by 0.80% to close at 8.807 trillion naira. The All Share Index, ASI,

ended the week with a 0.2% decline on Friday, bringing week-on- week performance to 0.77%.

In their reaction to events in the stock exchange during the week, analysts at Afrinvest said: “As the

earnings season wind down, we believe market performance will be majorly driven by developments

in the macroeconomic space. Yet, following four consecutive days of decline, we expect bargain

hunters to show interest in some fundamentally sound stocks in the week ahead.”

Also, analysts at Cowry Asset Management noted that a mix of bargain hunting and profit taking

activities would mark activities in the market this week.

Source: Vanguard Newspaper