Domestic investors overtake offshore investors in equity trading in Aug~NSE
Domestic investors are gradually becoming the dominant players in the local bourse as they outperformed their offshore counterparts investors in August in total transactions on the Nigerian Stock Exchange (NSE), a new report by the Exchange has shown.
Many foreign portfolio investors have reduced their equity and debt holdings in the face of Nigeria’s currency crisis and the poor economic outlook induced by the impact of the coronavirus pandemic.
Though the NSE stated that total transactions on the local bourse declined by 8.49 percent in August compared with trading in July, domestic investors bought about 59 percent of total shares traded in the period.
In its latest report on domestic and foreign portfolio investment for the month of August, the local bourse said that total transactions at the nation’s bourse decreased by 8.49 percent to N94.45 billion (about $265.55million) in August from N103.21 billion in July.
“The total value of transactions executed by Domestic Investors outperformed transactions executed by Foreign Investors by circa 18 percent,” NSE stated in a report on Thursday.
For instance, local investors’ total transactions on the bourse represent 59 percent while foreign portfolio investors stood at 41 percent of transactions in the market.
A further analysis of the total transactions executed between the current and prior month (July 2020) revealed
that total domestic transactions decreased by 19.16 percent from N68.62 billion in July to N55.47 billion in August 2020.
“However, total foreign transactions increased by 12.69 percent from N34.59 billion (about $89.00million) to
N38.98billion (about $100.81million) between July and August 202,” the NSE stated.
The report, however indicated the dominant of the market by Institutional Investors, which outperformed Retail Investors by 4 percent in the period under review.
Transactions by retail investors decreased by 18.22 percent to N26.61billion in August compared with N32.54 billion traded in July, while the institutional investors transactions in the domestic market in August declined by 20.01 percent to N28.86billion against N36.08 billion in July.
Hitherto, foreign portfolio investors are the major players in the market until bad time hit Nigerian economy and yields on Nigerian fixed income and equity experienced decline.
Nigeria had lured foreign investors to buy its bonds with attractive yeilds while returns on investment in the equity market outperformed its pairs in the emerging market.
However, last year, yields on local fixed income tumbled as the Central Bank of Nigeria (CBN) slashed rate on its treasury bonds in a move to rebalance its portfolio.
The outbreak of the Coronavirus pandemic further worsened the country’s economic outlook, pushing out many foreign portfolio investors who took flight to safety, reducing their holdings on local debt and equity market.