July 25, 2022/CSL Research
The Nigerian equities market witnessed bearish sentiments in the month of June as the AllShare Index (ASI) lost 3.4%, the second monthly loss in H1 2022. This pushed the ytd gain to 21.3% in June from 25.6% in May. In same vein, the total value traded on the local bourse decreased by 74.2% m/m to N156.5bn (US$371.5m) from N607.5bn (US$1.45bn) in May.
The merger between Titan Trust Bank and Union Bank of Nigeria (UBN) which happened in May caused increased activities in May, hence the significant decline in transaction value between May and June. That said, June’s total traded value of N156.5bn (US$371.5m) was the lowest value traded in H1 as profit taking activities dominated the local bourse in the month of June.
Domestic investors’ share of total transactions reduced to 73.0% in June from 92.5% in May (ytd–85.4%), while foreign investors’ share was up to 26.96% in June from 7.5% in May (ytd–14.7%). The decrease in total transaction value was broad-based as both domestic (-79.7% m/m) and foreign investors (-6.9% m/m) decreased participation level. On the domestic front, the decrease in activity level to N114.3bn (US$271.4m; -391.7% m/m) was on the back of significant decline in transactions by both institutional investors (-85.6% m/m to N70.2bn; US$166.7m), and retail investors (-40.5% m/m to N44.1bn; US$104.7m).
On the other hand, unlike in May, when foreign investors increased their activity level (+67.3%
m/m), the reverse was the case in June, as they reduced activity level by 6.9% m/m. However, like the net inflow position of N5.8bn (US$13.7m) achieved in May, foreign investors retained a net inflow position of N7.1bn (US$16.8m) in June. The stronger decrease in foreign outflows (-6.9% m/m) compared to the decrease in inflows (-3.5% m/m), led to the net inflow position.
Despite the poor outing in the month of June (-3.4% m/m), the domestic equities market closed positive in H1 2022 with ytd gain of 21.3%. Going by the sustained foreign investors’ apathy towards Naira assets and the possible movement of funds into the fixed income market in H2, given CBN’s hawkish stance, the direction of the equities market for the rest of the year will likely depend on internal factors such as, corporate actions and announcements, and earnings performance.
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