By NKIRUKA NNOROM

Local investors’ participation has been identified as key factor for sustaining the tempo of recovery recorded in the Nigerian Stock Exchange, NSE, in recent times.

Stockbrokers that spoke to Vanguard on recent developments in the market, where the All Share Index, ASI, and market capitalisation have been on downward stride, said that though statistics showed an increment in level of participation by local investors, but their involvement has been dominated by institutional investors and portfolio managers.

Data from the NSE on foreign/domestic participation in value terms indicated that Foreign Portfolio Investment, FPI, reduced to 48.7 percent during the month of May, 2013, while domestic transactions increased significantly to 51.3 percent over the same period.

Analysis showed that FPI, which started at 36.9 percent at the beginning of the year increased to 52.8 percent at the end of the first quarter, 2013.

The increasing trend of FPI transactions continued into the second quarter of the year and closed at 64.5 percent at the end of April, but reduced significantly to 48.7 percent at the end of May, 2013.

File photo: The floor of Stock exchange

On the other hand, domestic transactions decreased from 63.1 percent at the beginning of the year to 47.2 percent at the end of the first quarter and closed at 35.5 percent at the end of April. The figure, however, increased to 51.3 percent at the end of May,

The stockbrokers noted that the increase seen in terms of local investors came from fund managers, saying that more retail investors’ participation was needed to stem the tide of bears’ activities and further stabilise the market.

According to a stockbroker, who pleaded anonymity, the depreciation in the market was as result of dumping of shares by foreign investors.

He explained that  ?foreign investors exited from Nigeria market following the announcement by the US Federal reserve of its intension to stop quantitative easing, QE. He insisted that major players in the nation’s stock market were foreign investors despite the dominance of local investors, insisting that modalities should be put in place to ensure the return of retail investors to the market.

Also, Vetiva Capital Management Limited, a Research firm, while presenting report on the ‘Capital Market Rally Sentimental or Fundamental’,  at the capital market committee meeting in Lagos  said that globally, activities in the capital markets  receded in the month of June. They said that as a result, the All Ahare Index year-to-date (YTD) declined from 40 percent to 20 percent.

The research company said that the market has been driven by sentiment rather than fundamentals, stressing that the participation of high net-worth domestic investors in the market is very important.

Giving credence to this, the NSE’s chief executive, Mr. Oscar Onyema told journalists in an interactive forum, Friday, that the recent recovery witnessed in the capital was driven principally by foreign investors. He noted that the influx of foreign investors was due to various investors’ education it held in 2013.

He said, “We went to them and explained the new policies we are putting in place and what we are doing and they came back because they understand the dynamics of the market. They understand that stock market is cyclical in nature, but we are not focusing on foreign investors alone. “We cannot afford to focus on the foreign investors and leave out local retail investors and vice versa. There should be a balance between the two and that is what is what we are trying to achieve.”