Foreign investors rekindle interest in Nigerian stocks

Foreign portfolio investors have restarted intense bargain-hunting for Nigerian value stocks as stable second quarter earnings, locked-up foreign exchange, low fixed-income yields and attractive valuations appeared to be driving inflows into quoted equities.

Trading data at the Nigerian Stock Exchange (NSE) at the weekend showed that foreign portfolio investors stirred the bulls in major sectors of the economy with increased orders for attractive stocks in the oil and gas, telecommunications and consumer goods sectors.

Increased bargain-hunting by foreign portfolio investors (FPIs) led Nigerian equities market to its third consecutive positive closing position at the weekend, the first of such trends in seven months. Average return at the Nigerian equities market closed weekend at 0.63 per cent, equivalent to net capital appreciation of N83 billion for the week. The NSE Oil and Gas Index, which tracks the oil and gas sector, posted average gain of 5.92 per cent while the NSE Consumer Goods Index appreciated by 2.25 per cent.

Market analysts said the positive return for the market was driven mainly by activities of FPIs on some major stocks. Analysts at Cordros Securities said the market was driven by “foreign investors taking positions in fungible stocks”.

Afrinvest Securities said the positive market performance was due activities in certain stocks in the telecommunication and banking sectors.

The Nation had exclusively reported that latest report on FPIs had shown improvement in June 2020 after FPIs touched 29-month low in May 2020. FPIs rose to N56.34 billion in June 2020 as against N35.24 billion recorded in May 2020. FPI inflows improved from N18.43 billion in May 2020 to N25.27 billion in June 2020 while outflows also increased from N16.81 billion in May 2020 to N31.07 billion in June 2020.

The All Share Index (ASI)- the common value-based index that tracks share prices at the NSE, at the weekend closed at 25,199.84 points as against its opening index of 25,041.89 points last week. Aggregate market value of all quoted equities also rose from its opening value of N13.063 trillion to close weekend at N13.146 trillion.

The momentum of activities also improved as total turnover rose to 1.33 billion shares worth N13.93 billion in 19,392 deals last week as against a total of 1.065 billion shares valued at N10.80 billion traded in 20,482 deals two weeks ago.

Further analysis of trading data at the NSE showed that the financial services sector continued to dominate the activity chart, accounting for 886.55 million shares valued at N8.36 billion in 10,161 deals; representing 66.79 per cent and 60 per cent of the total equity turnover volume and value respectively. The conglomerates sector occupied a distant second with 155.956 million shares worth N187.728 million in 828 deals while the consumer goods sector placed third with a turnover of 141.099 million shares worth N2.229 billion in 3,403 deals.

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The three most active stocks were Guaranty Trust Bank Plc, Transnational Corporation of Nigeria Plc and Zenith Bank Plc, which altogether accounted for 419.455 million shares worth N6.079 billion in 3,854 deals, representing 31.60 per cent and 43.63 per cent of the total equity turnover volume and value respectively.

Also, a total of 25,904 units of Exchange Traded Products (ETPs) valued at N169.443 million were traded in 17 deals compared with a total of 118,062 units valued at N1.061 billion traded in 26 deals two weeks ago.

In the quoted debts market, a total of 2,542 units of bonds valued at N3.412 million were traded in seven deals compared with a total of 56,530 units valued at N58.664 million traded in 15 deals penultimate week.

Meanwhile, global equities also closed the week on a positive note as investors reacted positively to global optimism on COVID-19 and general economic recovery. Japan’s NIKKEI 225 Index led global returns with 4.3 per cent. Russia followed as RTS Index rose by four per cent. Hong Kong’s Hang Seng Index appreciated by 2.7 per cent. In the United States of America, major indices closed positive with the Dow Jones Industrial Average (DJIA) rising by 1.7 per cent. The S & P 500 Index rose by 0.6 per cent while NASDAQ closed flat. In United Kingdom, the FTSE All Share Index rose by 0.9 per cent. France’s CAC 40 Index appreciated by 1.5 per cent. Germany’s XETRA DAX Index posted a gain of 1.6 per cent while China’s Shanghai Composite Index appreciated by 0.2 per cent.

In Africa, Egypt’s EGX led with average gain of 1.2 per cent. South Africa’s FTSE/JSE All Share Index appreciated by 0.5 per cent while Morocco’s Casablanca MASI index rose by 0.5 per cent. However, Kenya’s NSE 20 Index dropped by 0.8 per cent while Ghana’s GSE Composite Index dipped by 0.5 per cent.

Analysts at Afrinvest Securities said they expected a mixed performance this week “as investors take profit while seeking bargain hunting opportunities”.

“Our view continues to favour cautious trading as risks remain on the horizon due to a combination of the increasing number of COVID-19 cases in Nigeria and weak economic conditions. Thus, we continue to advise investors to seek trading opportunities in only fundamentally justified stocks,” Cordros Securities stated.