August 22, 2022/CSL Research
The bearish sentiments in the Nigerian equities market extended into the month of July as
the All-Share Index (ASI) lost 2.8%, the third monthly loss year to date. This pulled the ytd
gain to 17.9% in July from 21.3% in June and 25.6% in May 2022. In the same vein, the total value traded on the local bourse decreased by 35.4% m/m to N101.2bn (US$236.9m) in July from N156.5bn (US$371.5m) in June. The continued uptick in the fixed income yields amid tight system liquidity ensured persistent selloffs in the equities market. Although there were favourable results released by some sector bellwethers in the period, they were insufficient to boost investors’ sentiments. That said, July’s total traded value of N101.2bn (US$236.9m) is the lowest monthly value traded year to date.
Domestic investors’ share of total transactions reduced to 70.7% in July from 73.0% in June (ytd–84.5%), while foreign investors’ share was up to 29.3% in July from 26.96% in June (ytd–15.5%). The decrease in total transaction value was broad-based as both domestic (-37.5% m/m) and foreign investors (-29.7% m/m) decreased participation level. On the domestic front, the decrease in activity level to N71.5bn (US$167.4m; -37.5% m/m) was on the back of significant decline in transactions by both institutional investors (-41.8% m/m to N40.9bn; US$95.6m), and retail investors (-30.5% m/m to N30.7bn; US$71.8m). On the other hand, similar to June, when foreign investors decreased their activity level (-6.9% m/m), the narrative was the same in July and at this time, significantly reduced activity level by 29.7% m/m.
However, unlike the net inflow position of N7.1bn (US$16.8m) achieved in June, the reverse was the case as foreign investors retained a net outflow position of N2.3bn (US$5.4m) in July. The stronger decline in foreign inflows (-44.5% m/m) compared to the decrease in outflows (-8.9% m/m), led to the net outflow position.
The domestic equities market started H2 2022 on a negative note, with YTD gain moderating to 17.9% in July 2022. Currently, the YTD gain stands at 15.6%, and we expect the bearish sentiments to persist, especially through Q3 2022 on the back of the CBN’s hawkish monetary stance. The continued rise in yields will fuel more movement of funds into the fixed income market. We, however, note that the selloffs in the equities market continue to create attractive entry points for investors, particularly on fundamentally sound names.
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