Based on the recently released NSE Domestic & Foreign Portfolio Investment Report for June, total value traded grew 8.2% m/m to N128.9bn (US$339.2m) in June 2020 with foreign transactions up 59.9% m/m to N56.3bn (US$148.2m) recovering from a 29-month low while domestic transactions dipped 13.6% m/m to N72.5bn (US$190.8m). Although the value of transactions executed by domestic investors declined, they maintained dominance of the local bourse as their share of total transactions in June was 56.3% (YTD; 60.5%) while foreign investors’ share of total transactions was 43.7% (YTD; 39.5%).
On the domestic front, transactions were dominated by institutional investors who traded N40.2bn (US$105.8m) while retail investors executed transactions worth N32.3bn (US$85.0m). Notably, foreign outflows grew to N31.1bn (US$81.8m) compared with N16.8bn (US$44.2m) in May. Hence, foreign outflows outpaced inflows, resulting in a net outflow of N5.8bn (US$15.3m) in June vs net inflow of N1.62bn (US$4.3m) in May. This may signify the possibility that foreign investors may have been able to move some of their funds out of the market. However, we note that FX illiquidity remains a major problem for FPIs.
In line with the rebound in activity level, the local bourse sustained the positive performance from May as the benchmark All Share Index (ASI) was up 0.9% in June. Although the month of June was largely volatile and bearish, we note that major market players were once again bolstered with some excess liquidity as OMO & T-bills maturities worth over N642.2bn hit the system while only N315.6bn worth were rolled over. We also note that bond auctions
absorbed N100.0bn of those maturities. Nevertheless, we believe some of the excess liquidity particularly for PFAs, corporates and HNIs flowed into the market as risk appetite increased.
Going forward, we expect FPIs to retain their apathy towards Nigerian equities, however inability to get FX may continue to force reinvestments as we have been observing in recent months. That said, we expect locals will continue to drive the market as we begin to see a flurry of OMO and T-bills maturities in the final months of the year which we expect to boost liquidity.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.