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NSE: Foreign investors raise stake on low equities valuations

By Nkiruka Nnorom

The volume of foreign portfolio investment (FPI) on the Nigerian Stock Exchange, NSE, rose by 54.30 per cent in the month of July as foreign portfolio investors continue to take advantage of low equities valuation to raise their stake in the market. Figures from the NSE showed that monthly FPI on the Exchange went up to N107.47 billion or 62.91 per cent of total transactions in the month of July compared to N69.65 billion recorded at the end of June 2015.

File photo: The  floor of Stock exchange
File photo: The floor of Stock exchange

On the contrary, total domestic transactions on the local bourse decreased to N63.36 billion, representing 37.09 per cent of total market transactions within the month.

Further breakdown showed that domestic investors conceded about 25.82 per cent of trading to foreign investors during the period. However, foreign portfolio investment inflows at N48.64 billion, accounted for 28.47 per cent of total transactions while the outflows accounted for 34.44 per cent of the total transactions in July 2015.

According to Johnson Chukwu, Managing Director/CEO, Cowry Asset Management Limited, the increase in foreign portfolio investments in July could be attributed to some investors that tried to take advantage of very short-term opportunities in the market. However, “If you look at the inflows and outflows of foreign portfolio investment in July, you will observe that the increase in investment was more than offset by the increase in outflows, indicating that the inflows literally left the same month.

“A breakdown of the inflows and outflows indicate a  14 per cent increase in FPI in July to N48.64 billion from N42.67 billion. However, there was a larger increase in outflow by 118 per cent from N26.98 billion recorded in June to N58.83 billion. In effect, foreign portfolio investors’ interest in the Nigerian market is very delicate,” Chukwu said.

Speaking in the same vein, Mr. Tola Odukoya, Managing Director, Asset Management & Research, Dunn Loren Merrifield, said investors were positioning to make optimal returns on the back of relatively attractive prices of Nigerian equities and their respective valuations and the weak domestic currency.

Also, Mr. David Adonri, Managing Director, Highcap Securities Limited, stated that foreign investors’ confidence is gradually being restored in the country as a result of the smooth political transition.

He added that measures being taken by Central Bank of Nigeria (CBN) to conserve foreign exchange are also having positive impact. “There is reasonable macroeconomic stability notwithstanding fragility in the crude oil market. These factors are having positive influence on foreign investors’ interest in Nigeria’s financial markets,” Adonri posited.


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