April 27, 2021/Proshare

By CSL Research 

Based on the recently released NSE Domestic & Foreign Portfolio Investment for March, the total transaction value increased 6.0% m/m to N228.5bn (US$560.6m) in March 2021 from N215.6bn (US$525.2m) in February 2021. Activity level among domestic investors grew 22.4% m/m to N187.9bn (US$460.8m) while foreign investor transactions dipped 34.5% m/m to N40.6bn (US$99.7m). Domestic investors still retained dominance of trading activities on the local bourse as their share of total transactions in March stood at 82.2% (YTD; 77.8%) while foreign investors’ share of the total transactions was 17.8% (YTD; 22.2).

Notably, on the domestic front, transactions were dominated by retail investors who traded N108.6bn (US$266.3m) while institutional investors executed transactions worth N79.3bn (US$194.5m). In our view, institutional investors’ hunt for rising yields in the fixed income space contributed to their weak participation. On the other hand, foreign outflows decreased to N20.3bn (US$49.8m) in March compared with N39.1bn (US$95.1m) in February. Similarly, foreign inflows declined to N20.4bn (US$49.9m) in March from N23.0bn (US$56.1m) in February, resulting in a net marginal inflow of N0.1bn (Us$0.2m) compared with a net outflow of N16.0bn (US$39.0m) in February.

Looking ahead, we see the release of favourable Q1 2021 results as the main driver of the local bourse which would likely remain dominated by domestic investors. As rates in the fixed income market rise, we expect local institutional investors to play more in that market. Rising bond yields in the US, will likely impact the Nigerian market negatively. With FX clarity still a prime concern, we expect foreign investors to retain apathy towards the local market.