Foreign Investors Exit Takes Toll As Stock Market Decline by N973.2bn in Seven Months

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Profit-taking on price appreciation of stocks recorded last year and foreign investors exit Impacted the Nigerian equities market negatively in the first seven months of 2021 as investors lost N973.2billion.

Specifically, market capitalisation, which measures the value of all stocks dropped by N973.2billion in seven months to N20.083trillion from N21.057trillion the stock market opened in 2021.

Consequently, the Nigerian Exchange Limited All-Share Index (ASI) dropped by 4.3 per cent to 38,547.08 basis points as at July 30 from 40,270.72basis points the market opened in the year under review.

Analysis of the market performance in the first seven month of 2021 showed that the stock market, which kicked off the year with bullish moment from 2020, appreciated by 5.3 per cent in January, 2021.

The market subsequently reversed as a result of profit-taking and modest yield on fixed income market, which created sentiment trading by investors’.
Accordingly, the stock market depreciated by 5.9 per cent in half year ended June 30, 2021.

Meanwhile, the profit-taking eased as the stock market ended July, which is the beginning of the second half of the year, with a growth of 1.7 per cent.
Further analysis of the market performance revealed that the market capitalisation, which measures the value of all equities, gained N324 billion from N19.760 trillion on June 30, 2021 to N20.084 trillion on July 30, 2021, while Nigerian Exchange (NGX) All-Share Index rose by 1.69 per cent from 37,898.56 points on June 30, 2021 to 38,547.08 points on July 30, 2021.

Market operators linked the positive performance to bargaining hunting and positioning ahead of corporate results for the half-year ended June 30, 2021.
While some investors were trading cautiously waiting for the corporate results, some were taking advantage of the low prices to enter the market, hence the gain recorded in the month under review.

Meanwhile, in line with the uptrend in the market, the sectorial indices closed on the positive side in the period under review.

The NGX Oil and Gas Index gained by 20.40 per cent. NGX Premium Board index followed with a gain of 6.58 per cent while NGX Banking index rose by 4.06 per cent during the month.

Others are NGX Industrial Goods, Pension, NGX 30 and Lotus II recorded 4.64 per cent, 3.12 per cent, 2.78 per cent and 2.10 per cent in the month of July. On the other side, the NGX Insurance index declined the most, falling 2.98 per cent, while NGX Consumer Goods went down by 0.54 per cent in July.

Similarly, the Nigerian Exchange (NGX) All-Share Index rose by 1.69 per cent from 37,898.56 points on June 30, 2021 to 38,547.08 points on July 30, 2021.
Commenting on the performance, the Chief Executive Officer, APT Securities and Funds, Mr. Garba Kurfi, attributed the stock market decline to foreign investors exit over foreign exchange scarcity.

He noted that investors’ profit-taking has also contributed to downward performance of the stock market in seven months.

According to him: “The foreign investors exit from the country has affected the equities market as many of them choose to move out of the country because of difficulties to obtain foreign exchange.”

He added that, “Other African Exchanges are doing better than us as they attracted more foreign investors. The profit-taking by investors’ was as a result upsurge of prices of stocks in the fourth quarter of 2020 when most of the stocks doubled their prices within three months.”

Analyst at PAC Holdings, Mr. Wole Adeyeye said investors are engaging in profit-taking over price appreciation of stocks recorded last year.
He maintained that the growth in July 2021 was drive by impressive half year results of listed banks, others.

According to him: “The market gained in July was driven interim dividend payout to shareholders and impressive corporate earnings. Most of the stocks in July were undervalued and investors take position in those stocks and it impacted on the All-Share Index. Investors positioned themselves for dividend payout by fundamentals and it also drives the stock market in July.”

He noted that the stock market in seven months performance was impacted by government policies; stressing investors took advantage of relatively high yield in fixed income market.

Looking ahead, he maintained that the Central Bank of Nigeria (CBN) suspension of foreign exchange supply to Bureaux de Change (BDC) would generate speculation this month.

According to him, “Foreign investors will be watching if the Naira will appreciate amid the latest policy of CBN on foreign exchanges market. If the CBN can sustain foreign exchange supply to the banking sector, the stock market might appreciate further in August.”

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