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Stocks: Foreign transactions shed N66bn

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Stocks: Foreign transactions shed N66bn

 

Following growing political tension ahead of the 2019 general elections as well as cautious approach adopted by foreign portfolio investors (FPIs), there was a significant decrease of 64.68 per cent in total foreign transactions from N102.41 billion in June 2018 to N36.17 billion in July.

 

According to a report obtained by New Telegraph, foreign outflows reduced by 69.99 per cent from N54.45 billion to N16.34 billion while foreign inflows also reduced by 58.65 per cent from N47.96 billion to N19.83 billion in the same period.

 

However, further checks showed that domestic investors outperformed foreign investors by 50.48 per cent in July 2018.

 

Total domestic transactions increased by 28.72 per cent from N85.38 billion in June to N109.9 billion in July 2018.

 

The domestic transactions were largely driven by the 55.48 per cent increase in the retail domestic participation, which recorded N29.12 billion in June 2018 and N65.42 billion in July 2018.

 

Total transactions at the nation’s bourse reduced by 22.21 per cent from N187.78 billion recorded in June 2018 to N146.07billion (about $478.3 million) in July 2018.

 

The cumulative transactions from January to July increased by 54.38 per cent from N1.129 trillion recorded in 2017 to N1.743 trillion in 2018.

 

Highlights of the domestic composition of transactions on the exchange between January and July 2018 showed that the institutional composition of the domestic market reduced by 20.91 per cent from N56.24 billion in June to N44.48 billion in July 2018 while the retail composition increased by 124.66 per cent from N29.12 billion to N65.42 billion within the same period.

 

This indicates a significantly higher participation by retail investors over their institutional counterparts in July 2018.

 

Market analysts sighted apprehension over the upcoming 2019 general election as well as the cautious stand adopted by foreign portfolio investors and other domestic portfolio managers over the unfolding political events in the country as major factors for the sustained bear market.

 

Investors have also been deterred by a political spat playing out before presidential elections slated for February next year that saw several lawmakers defect from the ruling party to the main opposition group and the intelligence services blockading National Assembly.

 

Reacting to the development, Mr. Johnson Chukwu, Managing Director/CEO, Cowry Asset Management, explained that there has been reluctance on the part of foreign portfolio investors to invest in equities since the beginning of the year.

 

He stated that the distribution of their (foreign investors) investment in the first quarter of the year indicated greater concentration in the short end of the market, which was the short-term treasury bills.

 

Chukwu said: “For the foreign portfolio investors, they feel that political risk has been fast-tracked. The initial expectation was that political risk will emerge in the last quarter of this year, but interestingly, given the challenges encountered by the leading party in their primaries, that has exacerbated the political risk.

 

“So, foreign investors are now wary of putting additional resources into the equities market given that at the periods of political or economic uncertainty, investors will move away from variable income assets to fixed income assets.”

 

According to analysts at Investdata, amidst anxiety in the political environment ahead of 2019 elections, the drama that played out recently with the barricading of the National Assembly complex and an altercation between a legislator and masked secret police officers wielding gun that went viral further thickened the air of uncertainty over 2019, reminiscence of the military era.

 

“With this and other drama series happening in Nigerian politics, the end of the ongoing correction may not just be in sight yet, even as the gale of defection continues across the nation, just before the party’s primaries. This situation may continue even after.

 

“This suggests that the already cautious trading pattern will persist as the just concluded earnings season will not make much difference. The financials have only revealed the state of these companies as a guide to help investors as they watch market trend and other events,” they said.

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