SAT 05 FEB, 2022-theGBJournal- According to the Domestic and Foreign Portfolio Report of the NGX, total transactions at the local bourse declined by 19.3% m/m to N158.26 billion in December 2021 (November: NGN196.14 billion).
The decline was primarily due to a decrease in the domestic (-2.9% m/m to N126.58 billion) and foreign (49.2% m/m to N35.32 billion) transactions. We think the continued low participation from the foreign investors reflects the lingering FX liquidity constraints and lack of flexibility in the FX framework.
Indeed, foreign investors participation in 2021FY (22.9% of total transactions vs 2020FY: 33.6%) is the lowest since at least 2012, when the NGX started keeping current records. Overall, gross transaction value settled at N1.90 trillion in 2021FY (2020FY: NGN2.17 trillion).
While the declaration of 2021FY dividends may support market performance in H1-22, we believe buying activities will be constrained by expectations regarding uptick in yields in the FI market. Also, FPIs who have exhibited a lacklustre interest in domestic equities are likely to remain on the sidelines due to FX liquidity challenges and interest rate hikes by central banks in advanced countries.
Twitter-@theGBJournal|Facebook-The Government and Business Journal|email: govandbusinessj@gmail.com|
