Total transactions by foreign portfolio investors in the stock market have declined by 36.53 per cent, about N305.3 billion, as foreign portfolio outflows continued to outpace inflows.
Total transactions at the stock market also dropped by 31.2 per cent, equivalent to N542 billion.
Official report on foreign and domestic portfolio transactions in the past seven months obtained at the weekend indicated that total foreign transactions dropped to N530.57 billion by last month, compared with N835.89 billion recorded by last year.
Foreign inflows had declined by 39.24 per cent from N400.48 billion by July 2018 to N243.35 billion by July, this year, representing a drop of N157.13 billion. Foreign outflows, however, also dropped from N435.41 billion to N287.22 billion.
The report showed a consecutive seven-month net portfolio deficit as foreign transactions tended more on sales than buys, leading to a net portfolio deficit of N43.87 billion for the seven-month period ended July 2019.
The report, coordinated by the Nigerian Stock Exchange (NSE), included transactions from nearly all custodians and capital market operators and it is widely regarded as a credible measure of foreign portfolio investment (FPI) trend.
The report uses two key indicators-inflow and outflow, to gauge foreign investors’ mood and participation in the stock market as a barometer for the economy.
Foreign portfolio outflow includes sales transactions or liquidation of equity portfolio investments through the stock market while inflow includes purchase transactions on the NSE. Segmental analysis delineates the proportion of foreign to local participation, institutional to retail investors as well as the momentum of activities among others.
Total transactions at the Nigerian equities market had also dropped 31.2 per cent or N542 billion to N1.20 trillion in July 2019 as against N1.74 trillion recorded in comparable period of 2018. Domestic transactions also followed the foreign portfolio flows, albeit at a slower pace, dropping by 26.12 per cent or N236.99 billion from N907.44 billion in July 2018 to N670.45 billion in July 2019.
Retail domestic investors appeared to be filling the space as domestic institutional investors mused over the outlook. Retail domestic investors traded N355.15 billion as against N315.29 billion traded by institutional domestic investors in the year compared with the situation in 2018 when institutional domestic investors outpaced retail domestic investors with N528.18 billion against N3379.26 billion.
The latest report highlighted the continuing decline in foreign transactions amid general slowdown in the stock market.
Foreign transactions saw a steep decline in the immediate past month from N96.74 billion in June, this year to N57.78 billion in July 2019. Domestic transactions also dropped significantly from N200.51 billion in June, this year to N55.69 billion in July 2019.
Total foreign transactions for the six-month period ended June 30, 2019 had stood at N472.78 billion, a decline of 40.9 per cent from N799.70 billion recorded in the comparable period of 2018. Alongside the steep decline in foreign transactions, foreign outflows had also continued to outpace inflows with net foreign portfolio investment (FPI) deficit rising from N38.41 billion in first half of 2018 to N42.84 billion in 2019.
Foreign inflows dropped from N380.65 billion in first half 2018 to N214.97 billion in first half 2019 while foreign outflows also declined from N419.06 billion in first half 2018 to N257.81 billion in first half of the year.
Total transactions at the equities market had dropped by N509.71 billion or 31.91 per cent from N1.597 trillion in first half 2018 to N1.088 trillion in first half 2019. Domestic transactions had increased consecutively from N54.02 billion in March 2019 to N71.99 billion, N143.87 billion and N200.51 billion in April, May and June 2019 respectively.
Low appetite for equities had led to significant depreciation in share prices at the stock market. The Nation had reported that investors in Nigerian equities had lost N1.38 trillion in capital depreciation over the past seven months as the onset of the first half earnings season failed to sustain expected recovery at the stock market. Equities had suffered their worst price depreciation, so far, this year in July, dropping by an average of 7.50 per cent, valued at about N990.45 billion.
The steep decline in July had worsened the average year-to-date return, which had closed first half at -4.66 per cent, to -11.81 per cent, equivalent to net capital depreciation of N1.38 trillion for the seven-month period.
With a drop of 17.81 per cent last year, the continuing decline at the equities market implied average decline of 29.62 per cent over the past 19 months. This implied that average investors who had invested over the period had lost almost a third of their portfolios, altogether implying a loss of about N4 trillion for the entire market.
Equities have traded mostly on the negative this year, declining in five out of the seven past months. The market also closed both the first and second quarters on the downside and most analysts remained cautious about the outlook for the third quarter.
The All Share Index (ASI) – the main value-based index that tracks share prices at the Nigerian Stock Exchange (NSE), closed July at 27,718.26 points as against its month’s opening index of 29,966.87 points, June’s closing index. The ASI had opened 2019 at 31,430.50 points, 17.81 per cent down from its 2018’s opening index of 38,243.19 points. It had however rallied a world-leading gain of 42.30 per cent in 2017.
