NSE: Foreign investments inflow down to N16.10bn in February … as equities market halt rally

INVESTORS’ apathy for investment in the stock market has continued to rise as both foreign and domestic investors’ participation on the Nigerian Stock Exchange, NSE, took a downward turn during the month ended February 28, 2017. Data polled by the NSE showed that total foreign investors’ transaction on the NSE slowed by 21.52 per cent to N34.54 billion from N44.01 billion to during the same period. Also, domestic transactions decreased by 22.88 per cent from N51.31 billion recorded in January 2017 to N39.57 billion in February 2017 Foreign investment inflow declined to N16.10 billion from N22.61 billion, representing 28.79 per cent decrease, while total foreign investment outflow decreased by 13.83 per cent to N18.44 billion compared to N21.40 billion outflow in the previous month in January 31, 2017. Further analysis showed that the institutional composition of the domestic market decreased by 21.93 per cent from N31.19 billion recorded in January to N24.35 billion in February 2017. The retail composition also decreased by 24.35 per cent from N20.12 billion to N15.22 billion 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. Economic fundamentals According to Mr. Johnson Chukwu, Managing Director/CEO, Cowry Asset Management Limited, 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, inter-bank 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 N71.1 billion from their investment during the week. The market capitalization, which started the week at N8.878 trillion fell by 0.80 per cent to close at N8.807 trillion. The All Share Index, ASI, ended the week with a 0.2 per cent decline on Friday, bringing week-on-week performance 0.77 per cent. Performance across sectors was bearish as all indices, except the industrial goods index which rose by 5.1 per cent buoyed by 13.9 per cent increase in Lafarge Africa due to a better than expected 2016 full year financial result. The oil & gas index depreciated the most, dropping by 3.2 per cent on the back of losses in Seplat Petroleum Development Company Plc that fell by 9.7 per cent and Forte Oil recorded -6.2 per cent return. Similarly, the banking index slid by 2.1 per cent on account of 5.1 per cent and 4.5 per cent decline in Access Bank Plc and Zenith International Bank Plc. The insurance and consumer goods indices also followed suit, losing 1.1 per cent and 0.3 per cent respectively. Overall, market sentiment weakened during the week as a total of 16 stocks advanced in contrast to 32 decliners. The best performing stocks for the week were Lafarge Africa, which rose by 13.9 per cent, followed by Fidson Healthcare Plc that rose by 13.5 per cent. Livestock Feeds Plc closed as the third, rising by 10.9 per cent while Guinness, Seplat and Diamond Bank Plc declined the lost, depreciating by 9.8 per cent, 9.7 per cent and 8.5 per cent respectively. In their reaction to events in the stock exchange during the week, analysts at Afrinvest said: “As the earnings season winds 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.