January 26, 2021/Proshare

by CSL Research

Based on the recently released NSE Domestic & Foreign Investment Report for December, the total value traded declined 15.3% m/m to N269.2bn (US$687.1m) in December from N317.8bn (US$813.9m) in November 2020. The decline in value traded was driven by reduced activities among domestic investors, down 20.4% m/m to N199.3bn (US$508.6m) while foreign investors marginally increased their participation level in the market as foreign transactions grew 3.9% m/m to N69.92bn (US$178.4m). However, domestic investors retained dominance of trading activities on the local bourse as their share of total transactions in December was 74.0% (YTD; 66.4%) while foreign investors’ share of total transactions was 26.0% (YTD; 33.6%).

On the Domestic front, transactions remained dominated by the institutional investors for the seventh consecutive month as they traded N138.1bn (US$352.4m) compared with N144.1bn (US$367.7m) recorded in November, representing 4.2% decline m/m while retail investors executed transaction worth N61.2bn (US$156.2m) compared with N106.38bn (US$271.5m) recorded in November, representing 42.5% decline m/m. The decline is attributed to profit taking activities as many investors continued to take profits from gains recorded previously. Foreign inflows decreased to N21.1bn (US$53.8m) in December from N25.5bn (US$65.2m) in November resulting in a net outflow of N27.6bn (US$70.5m) compared with a net outflow of N16.23bn (US$41.4m) in November.

Going forward, we still expect some liquidity to flow into the local bourse given sustained low yield from fixed income instruments. We also expect positive full year numbers and prospects of dividends to keep the market upbeat in the near term. Overall, activities in the local bourse will remain dominated by local investors in our view.