Domestic Investors Dominate Equities Trading With N1.4trn Value

Local investors in Nigeria have continued to deepen equity market position as a total of N1.419 trillion transaction was carried out on the Nigerian Exchange (NGX) Limited in the first six month of the year.

The domestic investors have continued to hold ground on the floor of the Exchange despite rising inflation and currency volatility in the foreign exchange market as they were major drivers of the Domestic & Foreign Portfolio Investment.

This was contained in the Domestic and Foreign Portfolio Investment (FPI) June 2022 report. The report is prepared on a monthly basis by NGX Regulation Limited, with trading figures from market operators on their Domestic and Foreign Portfolio Investment (FPI) flows. These transactions are carried out by domestic and foreign investors.

On a year-to-date and half-year analysis as at June 30, 2022, total Domestic and Foreign Portfolio Investments in equity trading rose 60.7 per cent to N1.66 trillion in 2022 from N1.03 trillion in the same period last year. This shows that domestic transactions for the period printed N1.42 trillion from N812.5 billion while trades by their foreign counterparts were N243.5 billion from N221.9 billion last year.

Meanwhile, trading activities for the month of June, 2022 revealed the total value of transactions executed by domestic Investors outperformed transactions executed by foreign investors by 46 per cent.

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Capital market analysts stated that, “interestingly, investors have historically shown uneasiness during the second half of a pre-election year as foreign investors have always exited Nigerian equities aggressively with local institutional investors following suit.”

Analysts at Cowry Assets Management Limited said looking at the activities of institutional investors during the month of June, they outperformed the retail Investors by 22 per cent.

Resultantly, a monthly comparison between categories of investors in domestic transactions shows there was a 40.54 per cent decline to N44.11 billion in June from N74.19 billion in May in retail transactions while the institutional composition of the domestic market decreased by 85.61 per cent from N487.96 billion in May 2022 to N70.22 billion in June 2022.

“As it is obvious that foreign investors no longer play an active role in trading Nigerian equities as they control less than 25 per cent of market trading activities, we think local institutional investors may have more incentive to remain in the market despite the rates hike by the Central Bank of Nigeria (CBN) and other central bank chiefs across the globe in July.

“Also, we expect the delivery of half-year strong corporate earnings to act as major catalysts going forward, and consequently opening up attractive profit taking opportunities for investors,” they said.

The chief operating officer of InvestData Consulting Limited, Mr Ambrose Omordion said: “it is a good thing that domestic interest is building in the market; it is really positive. This is what we have been clamouring for, where the local investors will be the drivers of the market. What we, typically, see is that domestic investors follow the investment pattern of the foreign investors whereby if we see that they are buying, we will buy and if we find out they are selling, we will sell.”