May 30, 2022/CSL Research
The recently released NGX Domestic & Foreign Investment report for April 2022 showed that the total value traded increased by 11.1% m/m to N205.9bn (US$494.3m) in April from N185.26bn (US$445.25m) in March 2022. Unlike in the previous month (March), where the All Share Index (ASI) returned a m/m loss of 0.9%, the reverse was the case in April as the ASI gained 5.7% m/m, further pushing the ytd gain to 16.2% in April from 9.9% in March.
The release of favourable Q1 results ignited investors’ interest, which was already waning from the post-publication of FY results in February and March. Among the recent drivers of the recent market upbeat was the strong performance of stocks in the consumer goods and oil palm sectors, which led to renewed buying interest in those names. Domestic investors’ share of total transactions improved to 86.9% in April from 77.2% in March (YTD–82.6%), while foreign investors’ share was down to 13.2% in April from 22.8% in March (YTD–17.4%).
The increase in activity level of domestic investors (+25.0% m/m) drove the increase in total activity level, as foreign investors further reduced participation on the local bourse by 35.8% m/m. On the local front, the increase in activity level to N178.8bn (US$429.2m; +25.0% m/m) was broad-based, riding on increased transactions by institutional investors (+34.1%m/m to N110.6bn; US$265.5m) and retail investors (+12.6% m/m to N68.2bn; US$163.7m).
On the other hand, Similar to March, when foreign investors reduced their activity level (-7.2% m/m), the narrative was still the same in April and at this time was faster (-35.8% m/m). However, the foreign investors reversed to a net inflow position of N2.96bn (US$7.1m) in April from a net outflow position of N9.43bn (US$22.7m) in March. The stronger decline in foreign outflows (-53.3% m/m) compared to the decline in inflows (-8.2% m/m), led to the reversal from the net ouflow position.
In contrast to the bearish trend in the global equities market driven by increasing interest rates, the positive direction in the domestic equities market extended into Q2 as the YTD gain improved to 16.2% in April from 9.9% in March. Considering the trend so far, we expect the activity level in May will remain high. However, if market rates begin to rise significantly following the recent hike in the MPR to 13.0%, we may begin to see less interest in the equities market in subsequent months.
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